Let’s look at some of the most frequent financial statement adjustments that should be considered during a business valuation.
In real estate, arm's length transactions refer to a business deal where parties involved have no previous relationship prior to negotiating an agreement. In this type of transaction, the buyer and seller act independently without one party influencing the other.
Seller’s Discretionary Earnings (SDE) is an integral cash flow stream for small businesses. SDE encompasses all cash flows paid to a single owner-operator, including an adjustment for owner’s salary, discretionary expenses and nonrecurring income/expenses.
When performing a business valuation, many different risk factors have to be taken into account, including barriers to entry. Barriers to entry are the obstacles or hindrances that make it difficult for new companies to enter a given market.