CBV MQE key terms

The price at which property would change hands between a willing buyer and seller, neither compelled to act, both having reasonable knowledge of relevant facts, and neither being a forced participant.

A statutory or accounting standard of value, often defined as the price received in an orderly transaction between market participants at the measurement date, distinct from fair market value in some jurisdictions.

The value of a business or asset to a particular owner or prospective owner based on that party's specific investment requirements, synergies, and expectations, rather than a hypothetical market.

The definitional premise that specifies what is being measured in a valuation, such as fair market value, fair value, investment value, or intrinsic value, and drives the choice of methods and assumptions.

The assumed condition of a sale or use, such as going concern, orderly liquidation, or forced liquidation, which affects the price a hypothetical buyer would pay.

The value of an established business as an operating entity with assembled assets, workforce, and customer relationships, exceeding the sum of its individual asset values in place.

The amount realizable from selling a business or its assets, either in an orderly disposition over time or a forced sale under duress, after deducting selling costs and liabilities.

The value an investor believes an asset is truly worth based on fundamental analysis of its cash flows, assets, and prospects, independent of current market quotations.

A hypothetical buyer or seller in the principal market for an asset who is independent, knowledgeable, willing, and able to transact, whose assumptions frame fair value measurements.

The use of an asset that is physically possible, legally permissible, financially feasible, and produces the highest value, whether the asset is currently used that way or not.

A family of valuation methods that convert expected future economic benefits, such as cash flows or earnings, into a present value using discounting or capitalization techniques.

A valuation approach that estimates value by comparing the subject to similar assets or businesses for which transaction prices or market multiples are observable, then adjusting for differences.

A valuation approach that estimates value by adjusting the balance sheet assets and liabilities to fair market value and summing the net result, often used for holding companies or asset-intensive firms.

An income approach technique that projects future cash flows, discounts each to present value at a rate reflecting risk, and sums them plus a terminal value to estimate enterprise or equity value.

An income approach technique that converts a single representative earnings or cash flow measure into value by dividing it by a capitalization rate that reflects risk and expected growth.

The rate of return used to convert future cash flows to present value, reflecting the time value of money plus the risk and uncertainty of receiving those cash flows.

A divisor applied to a single period's expected earnings or cash flow to estimate value, equal to the discount rate minus expected long-term growth, expressed as a percentage.

The blended required return on a company's debt and equity, weighted by their market value proportions, commonly used to discount unlevered free cash flow to enterprise value.

The return investors require to hold a company's equity, often estimated with the capital asset pricing model using a risk-free rate, beta, and equity risk premium.

A measure of how much a stock's returns move relative to the overall market, used in the capital asset pricing model to scale the equity risk premium for systematic risk.

The excess return investors expect from holding a diversified portfolio of equities over a risk-free investment, compensating for the systematic risk of the stock market.

The estimated value of a business beyond the explicit forecast period in a discounted cash flow model, commonly computed with a perpetuity growth formula or an exit multiple.

The cash generated by operations after reinvestment in working capital and fixed assets, available to providers of debt and equity, used as the basis for enterprise value in discounted cash flow analysis.

A market approach technique that applies valuation multiples derived from publicly traded comparable companies to the subject company's financial metric, adjusting for size, growth, and risk differences.

A market approach technique that applies pricing multiples observed in acquisitions of similar companies to the subject's metric, often requiring adjustments for control premiums and transaction timing.

A ratio of a company's value, such as enterprise value or share price, to a financial metric like EBITDA, revenue, or book equity, used to compare and price businesses.

The total value of a business's operating assets, equal to equity value plus debt and preferred stock minus cash, representing the value attributable to all capital providers.

The value of the owners' residual interest in a business, equal to enterprise value less debt and preferred claims plus cash, or the market capitalization of a public company.

The additional amount a buyer pays for a controlling interest to gain authority over decisions, cash flows, and strategy, often measured by comparing acquisition prices to pre-announcement trading prices.

A reduction in value applied to a non-controlling ownership stake to reflect the lack of control over business decisions, distributions, and exit timing.

A reduction applied to a value estimate because an ownership interest cannot be readily converted to cash in a public market, reflecting time, cost, and uncertainty of sale.

The intangible value of a business arising from reputation, customer relationships, workforce, and other factors that generate earnings beyond a normal return on identified net tangible assets.

A hybrid technique that capitalizes earnings above a reasonable return on net tangible assets to value goodwill and other intangibles, then adds the adjusted tangible asset value.

An asset-based technique that restates a company's assets and liabilities from historical book amounts to fair market values, producing an adjusted net worth as the value indication.

A corporation electing pass-through federal taxation, whose earnings are taxed at shareholder level, often requiring valuation adjustments for shareholder-level taxes or built-in gains.

A business structure such as a partnership, limited liability company, or S corporation whose income is taxed directly to owners rather than at the entity level, affecting comparable-company selection.

A hypothetical income tax applied to a pass-through entity's earnings in valuation to improve comparability with C corporations, sometimes called the tax-affecting adjustment.

The specific date as of which a valuation opinion is expressed, which fixes the facts, market conditions, and information reasonably available to the analyst at that point.