Loss of Profit AnalysisThe need for loss of profit analysis is common incommercial disputes, shareholders disputes and litigation. In such cases, financial experts are often asked to provide an opinion on the quantification ofeconomic damages suffered by andistressed party. Loss Assessment Approaches:Business valuation and lost profits are two common damages estimation approaches used by financial experts.Business Valuation: Business valuation may be conducted to provide an accurate snapshot of the company’s financial standing to present to current or potential investors.
It is applied almost exclusively in entire business destruction, shareholder oppression, dissenting shareholder, family law and tax court matters.Lost profits: There are some cases that apply lost profits rather than business valuation as the measure of damages like breachof contract. There are other circumstances in which it may be appropriate to apply either the lost profits method or the business valuation method. While the selection of a particular methodology is based on facts and circumstances, the lost profits method can be an appropriate measure of damages when the damage is for a specificperiod of time (and not into perpetuity as with a business valuation), or when the damage can be related to a separately identifiable cash flow.Lost profits are commonly calculated based on the difference between the expected profits assuming the damaging event had not occurred and the actual profits received (or if there will be future damages, what profits are estimated to be received). Methods of Evaluation in Dispute & Litigation:The most recognized valuation methods consider are. Earnings or cash flow capitalization. Book value. Capitalized excess earnings.
Comparable companies. Other specific valuation method applicable to the peculiar industry.Premiums and Discounts applied in Valuation:In the case of valuing shares of stock or other ownership interests in a business, premiums or discounts may need to be applied to determine the shares’ true value. The premiums and discounts reflect the degree of control (or lack of control) that the stockholder or other company owner has.The discount rate used in a business valuation involves the overall risks of a company’s invested capital (debt and equity), whereas the discount rate in a lost profits calculation may apply only to specific risks.
RBSA’s role in Loss of Profit Analysis:In Loss of Profit Analysis, every business interest and every valuation assignment is unique, presenting its own set of challenges and demands. No one method or set of methods is right for all situations. It takes an objective, qualified valuation expert with the necessary training, sound judgment and experience to interpret the information correctly and arrive at correct and defensible results.RBSA is familiar with rules of court and essential reporting requirements; we hold the experience and expertise to provide financial litigation support services and expert testimony in legal actions.
We can assist in a wide range of litigation actions, including:. Breach of Contract/Fiduciary Duty – quantification of damages. Business Interruption – quantification of loss in claims.
Expert Witness Testimony – financial issues. Family Dispute – equalization of assets. Shareholder Dispute – quantification of damagesWe provide Loss Assessment Studies, market analysis, cost determinations, Lost-Profit Analysis, economic studies and industry reviews in a variety of business dispute situations. Credentials:Following are select credentials in Business/Equity Valuation:.
Financial Advisory Services for Brand Valuation of Deccan Chronicle, Andhra Bhumi, owned by Deccan Chronicles Holdings Limited for Management Review purposes. Valuation of Equity Shares, Assistance in the Due Diligence process of Noah Fashions Private Ltd.
Design and Execution of a Damage, Loss and Needs Assessment, ii) Conducting Damage and Loss Assessments after Disasters, and iii) Estimation of Post-Disaster Needs for Recovery and Reconstruction. Volume I, the guideline for Task Team Leaders, aims to facilitate the work of TTLs by providing the framework for conducting the assessment.