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Article

Valuation Models Applied to Value-Based Management—Application to the Case of UK Companies with Problems

by 1,2,3
1
School of Business, College of Social Sciences, Arts, and Humanities, Brookfield, University of Leicester, Leicester LE2 1RQ, UK
2
Group of Researchers for Applications of Physics in Economy and Sociology (GRAPES), Rue de la belle jardinière, 483, Sart Tilman, B-4031 Liege, Angleur, Belgium
3
Department of Statistics and Econometrics, Bucharest University of Economic Studies, Calea Dorobantilor 15–17, Sector 1, 010552 Bucharest, Romania
Forecasting 2020, 2(4), 549-565; https://doi.org/10.3390/forecast2040029
Received: 22 October 2020 / Revised: 15 November 2020 / Accepted: 23 November 2020 / Published: 11 December 2020
(This article belongs to the Special Issue New Frontiers in Forecasting the Business Cycle and Financial Markets)
Many still rightly wonder whether accounting numbers affect business value. Basic questions are “why?” and “how?” We aim at promoting an objective choice on how optimizing the most suitable valuation methods under a “value-based management” framework through some performance measurement systems. First, we present a comprehensive review of valuation methods. Three valuations methods, (i) Free Cash Flow Valuation Model (FCFVM), (ii) Residual Earning Valuation Model (REVM) and (iii) Abnormal Earning Growth Model (AEGM), are presented. We point out advantages and limitations. As applications, the proofs of our findings are illustrated on three study cases: Marks & Spencer’s (M&S’s) business pattern (size and growth prospect), which had a recently advertised valuation “problem”, and two comparable companies, Tesco and Sainsbury’s, all three chosen for multiple-based valuation. For the purpose, two value drivers are chosen, EnV/EBIT (entity value/earnings before interests and taxes) and the corresponding EnV/Sales. Thus, the question whether accounting numbers through models based on mathematical economics truly affect business value has an answer: “Maybe, yes”. View Full-Text
Keywords: valuation models; value-based management; performance measurement; accounting numbers; UK problems valuation models; value-based management; performance measurement; accounting numbers; UK problems
MDPI and ACS Style

Ausloos, M. Valuation Models Applied to Value-Based Management—Application to the Case of UK Companies with Problems. Forecasting 2020, 2, 549-565. https://doi.org/10.3390/forecast2040029

AMA Style

Ausloos M. Valuation Models Applied to Value-Based Management—Application to the Case of UK Companies with Problems. Forecasting. 2020; 2(4):549-565. https://doi.org/10.3390/forecast2040029

Chicago/Turabian Style

Ausloos, Marcel. 2020. "Valuation Models Applied to Value-Based Management—Application to the Case of UK Companies with Problems" Forecasting 2, no. 4: 549-565. https://doi.org/10.3390/forecast2040029

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