Valuation Glossary

The equity method is an accounting technique used by a company to record its investment in another company, typically when it owns 20-50% of the investee's shares and can exert significant influence over it. Under the equity method, the investment is initially recorded at cost, and the investor adjusts the carrying amount of the investment to recognize its share of the investee’s profits or losses.

Equity refers to ownership in something, like a business or property, after subtracting any debts. In business, equity often refers to shareholders' ownership in a company. It represents the portion of assets that belongs to shareholders. Equity can also mean fairness or justice in different areas of life. When talking about equity investments, it means owning shares in a company and having the right to share in its profits and decision-making.

An enterprise is a business or organization that operates to make money. It involves all the things a business does, like making and selling products, marketing, managing finances, and running operations. Enterprises can be small local businesses or big multinational companies. They play an important role in the economy by creating jobs and driving economic growth.

The efficiency ratio is a financial metric used to evaluate how well a company uses its assets and manages its operations to generate income.

The effective date is the specific date when something becomes official or legally valid. It's the date from which rights and obligations start and the terms of an agreement or event come into effect. It is important because it marks the beginning of when parties are legally bound by the terms and conditions specified. For example, in a contract, the effective date is when the contract becomes valid and the parties must follow its terms. It ensures clarity and establishes a starting point for legal and business matters.