Three Steps to Determine Enterprise Value Using Average Ratios Method

13:52, 11/07/2024

Circular 122/2017/TT-BTC has been issued by the Ministry of Finance regarding Vietnamese Valuation Standard No. 12.

When applying the average ratio method to determine the value of an enterprise, the determination is carried out according to the following steps:

- Step 1: Assess and select comparable enterprises.- Step 2: Determine the market ratios used to estimate the value of the enterprise to be appraised.- Step 3: Estimate the value of the enterprise to be appraised.

According to Circular 122 as well, a comparable enterprise in the average ratio method is one that meets the following conditions:

- Similar to the enterprise to be appraised in terms of main business sectors; customers and consumption market; financial indicators.- Having shares successfully traded on the market at the time of appraisal or close to the time of appraisal but not exceeding 01 year up to the time of appraisal.

More details can be found in Circular 122/2017/TT-BTC, effective from January 01, 2018.

- Thanh Lam -

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