Valuation of A Suffering Company
Additional adjustments to a valuation approach, whether it is market-, income- or asset-based, may be necessary in some instances. These involve:
- excess or restricted cash
- other non-operating assets and liabilities
- lack of marketability discount of shares
- control premium or lack of control discount
- above or below market leases
- excess salaries in the case of private companies.
There are other adjustments to the financial statements that have to be made when valuing a distressed company. Andrew Miller identifies typical adjustments used to recast the financial statements that include:
- working capital adjustment
- deferred capital expenditures
- cost of goods sold adjustment
- non-recurring professional fees and costs
- certain non-operating income/expense items.
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—Mason Cooley (b. 1927)
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—Philip Roth (b. 1933)