Terms
VALUATION GLOSSARY
BUSINESS VALUATION TERMS
The performance of business valuation services require a high degree of skill and imposes upon the valuation professional a duty to communicate the valuation process and conclusion, as appropriate to the scope of the engagement in a manner that is clear and not misleading. This duty is advanced through the use of terms whose meanings are clearly established and consistently applied throughout the profession.
Business Valuation - the act or process of determining the value of a business enterprise or ownership interest therein.
Control - the power to direct the management and policies of a business enterprise
Cost of Capital - the expected rate of return (discount rate) that the market requires in order to attract funds to a particular investment.
Discount - a reduction in value or the act of reducing value
Discount for Lack of Marketability - an amount or percentage deducted from the value of an ownership interest to reflect the relative absence of marketability.
Discount Rate - a rate of return (cost of capital) used to convert a monetary sum, payable or receivable in the future, into present value.
Goodwill - that intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified.
Intangible Assets - non-physical assets (such as franchises, trademarks, patents, copyrights, goodwill, equities, mineral rights, securities and contracts as distinguished from physical assets) that grant rights, privileges, and have economic benefits for the owner.
Minority Discount - a discount for lack of control applicable to a minority interest.
Minority Interest - an ownership interest of less than fifty percent (50%) of the voting interest in a business enterprise.