Valuation Glossary

The cost approach is a method used to determine the value of a property or asset. It calculates the value based on the cost to reproduce or replace the property. This involves estimating the cost of building a similar property from scratch, considering factors like materials and labor. The estimated cost is then adjusted for depreciation, and the value of the land is added to arrive at the final value. The cost approach is often used for new constructions or properties without comparable sales or income data. However, it may not be suitable for properties with unique features or significant obsolescence.

Control premium refers to the extra value or premium that someone is willing to pay for the ability to have control over a company. When a person or entity buys a controlling interest in a company, they gain certain advantages like decision-making power and influence. The control premium is the additional amount they are willing to pay for these benefits. The premium can vary based on factors like the company's size, profitability, and growth potential. It is often expressed as a percentage or dollar amount above the company's fair market value. The control premium is considered in situations like mergers, acquisitions, and business valuations. It represents the value placed on having control over a company's operations and direction.

Control refers to the power and authority to direct the activities, policies, and management decisions of an entity, typically a subsidiary or another business, through ownership of voting shares, contractual agreements, or other means

Contingent consideration refers to a payment arrangement in a business acquisition where the buyer agrees to pay additional amounts to the seller if certain future conditions or performance targets are met.

A consolidated cash flow statement is a financial report that shows the combined cash flow activities of a parent company and its subsidiaries. It provides a comprehensive overview of the cash inflows and outflows for the entire corporate group, rather than just the parent company alone.