SPECIFICITIES OF CAPITAL VALUATION OF YOUNG COMPANIES BY YIELD BASIS METHOD
SPECIFICITIES OF CAPITAL VALUATION OF YOUNG COMPANIES BY YIELD BASIS METHOD

Summary/Abstract: The capital valuation of young companies differs from the assessment of mature and developed companies. Namely, some of these companies achieve business results that are negative or at a low level. Even when they can generate a higher level of profit, the history of their existence is short, it depends on the possibility of borrowing capital, which makes the assessment through the yield method significantly more difficult than usual. Regardless of the industry in which they operate, the sector, the production, and sales arrangement, and the degree of innovation, these companies face not only the usual risk but also the risk of survival and uncertainty that the future brings. In estimating the value of the capital of young companies, standardized and traditional valuation methods can be used, and thus the yield basis method. Regardless of the chosen method of assessment, the assessor faces a lack of information about the history of “existence”. For this reason, for the assessment, all parameters involved in the capital evaluation process must be adjusted. The subject of this paper is capital valuation. The aim of this paper is to show how it is possible to estimate the value of capital using the yield method and to point out the specifics of this procedure. The object of this research are young companies. In this paper, we will first present the characteristics of young companies, and then the possibilities of estimating their capital by discounting cash flows as a type of yield basis method of capital valuation.

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