Tag Archives | value

Bankruptcy Courts

Bankruptcy Courts

All bankruptcies are filed in bankruptcy courts when they are located in the United States. Bankruptcy Courts are also subunits of U.S. District Courts. In addition, every U.S. District Court has a bankruptcy court. Applicable federal and state laws then determine bankruptcy proceedings.

The US Courts website states that, “Bankruptcy helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect financially troubled businesses.”

To prevent bankruptcy and to improve business value, click here to learn about the Exit Strategy Execution Plan in our SCFO Lab and everything else that is included.

bankruptcy courts

See Also :
Chapter 7 Bankruptcy
Bankruptcy Chapter 11
Chapter 12 Bankruptcy
Bankruptcy Chapter 13
Costs of Bankruptcy
Bankruptcy Code
Bankruptcy Information

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Asset Market Value vs Asset Book Value

See Also:
Accounting Income vs Economic Income
Economic Value Added
Value Drivers:Building Reliable Systems to Sustain Growth
Basis Definition
Variance Analysis
Goodwill Impairment

Asset Market Value versus Asset Book Value

Book value and market value are two ways to value an asset. An asset’s book value can differ from its market value. Market value is the value of an asset as currently priced in the marketplace. In comparison, book value refers to the value of an asset as reported on the company’s balance sheet; however, some assets are reported at market value on the balance sheet.

Book value is equal to the asset’s historical purchase price minus accumulated depreciation. Since book value is based on the asset’s actual purchase price, consider it more reliable but less relevant than market value.

Market value, also called fair market value, is equal to the asset’s current price or value in the open marketplace. Since market value is based on current market prices, consider it more relevant but less reliable than book value.

Asset Value for Company Valuations

Are you comparing asset valuation methods for the purpose of valuing your company? This can become complex, especially when comparing methods for valuing assets. When a valuation becomes complex, it is standard practice to consult with a valuation firm. Need help finding one? We will connect you with one of our strategic partners for your valuation needs. Fill out the form below to get connected:

Your will receive your information between 9-5 Monday through Friday. You can expect to hear back within 24 hours. We only use your information to contact you for the desired help.

If you don’t want to leave any value on the table, then download the Top 10 Destroyers of Value whitepaper.

asset market value

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Arm’s Length Transaction

See Also:
Accounting Principles
Accounting Concepts
Point of Sale (POS) Method
Working Capital From Real Estate
Which Bank to Choose?

Arm’s Length Transaction Definition

An arm’s length transaction or the arm’s length principle is a transaction that takes place between two completely unrelated parties. An arm’s length transaction also implies that the final transfer of assets or services will be valued at the fair market value.

Arm’s Length Transaction Meaning

Arm’s Length Transactions are important in the market because it is implied that these transactions will provide consistent and meaningful information. This differs if the two parties are related or are friends, who might provide a discount for the transfer of assets or services. An arm’s length sale is most often referred to in the real estate market where the fair market value must be determined at arm’s length. This is because the sale of one property affects the price of all the properties surrounding it. If the parties are related there will usually be a benefit for each party in the agreed upon price and drawing the agreed upon price away from the fair market value.

Arm’s Length Transaction Example

Bob is attempting to sell his house in the market and move away. His son Bernie lives in the same city. He would like to keep the house in the family as it has been for years. Bob has the house appraised and it is worth $350,000. However, his son has just entered into a job last year right out of college. Thus, he cannot afford the house at fair market value. Therefore, Bob decides that he will sell the house for $150,000. This is not an arm’s length transaction because the two parties are related. Furthermore, the agreed upon price was discounted well below the fair value. If Bob had sold to a complete stranger for $340,000 this would be arm’s length because they are unrelated. Even though the price is slightly below the appraisal the agreed upon price is the result of negotiations between the two parties.

arm's length transaction

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Ad Valorem Tax

See Also:
Flat Tax Rates
Marginal Tax Rate
Tax Brackets
Tax Efficiency
Internal Revenue Service (IRS)
Special Tax Bond

Ad Valorem Tax Definition

Ad Valorem, which is Latin for “according to value“, refers to the taxes imposed on people usually by local or state municipalities. The two types are ad valorem property taxes and ad valorem tariff taxes.

Ad Valorem Tax Meaning

Some U.S. states and local governments main income comes from an ad valorem tax. The first of these is a ad valorem property tax. This tax requires an appraise to value a household or land on a periodic basis. Once the value is determined, the owner is taxed accordingly. The other ad valorem example is a tariff on imports to the state or local government. These ad valorem tariffs are imposed upon imports into the state or local government. Often times it is a percentage of value of the goods being imported. Thus, if the value of the good goes up according to domestic goods then there is very little need to protect the domestic market. However, if the price goes down for international goods as compared to domestic goods then the tariff protects the domestic producers and provides income to the local government.

Ad Valorem Tax Example

For example, Bob owns a household worth $300,000, and pays property taxes to the state government at 5% or $15,000. Recently, Bob’s house has an appraisal performed. Now, he has to pay $20,000 in ad valorem taxes. What is the new value of Bob’s land? See the following equation worked out:

Bob’s land = $400,000 = $20,000/.05

ad valorem tax, Ad Valorem Tax Definition, Ad Valorem Tax Example

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Agency Costs

See Also:
Are You Collecting the Data You Need to Run Your Business?
Average Cost
Sunk Costs
Restructuring Expense
Joint Costs
Commercial Agents

Agency Costs Definition

The agency costs definition is the internal costs incurred from asymmetric information or conflicts of interest between principals and agents in an organization.

In a corporation, the principals would be the shareholders and the agents would be the managers. The shareholders want the managers to run the company in a way that maximizes shareholder value. Conversely, the managers may want to run the company in a way that maximizes the managers’ own personal power or wealth, even if it lowers the market value of the company. These divergent interests can result in agency costs. There are three common types of agency costs: monitoring, bonding, and residual loss.

(NOTE: Want the Pricing for Profit Inspection Guide? It walks you through a step-by-step guide to maximizing your profits on each side. Get it here!)

Types of Agency Costs

When the principals attempt to monitor or restrict the actions of agents, they incur. Learn about the types of agency costs below:

Monitoring Costs

For example, the board of directors at a company acts on behalf of shareholders to monitor and restrict the activities of management. This is to ensure that behavior maximizes shareholder value. The cost of having a board of directors is therefore, at least to some extent, considered an agency monitoring cost. Costs associated with issuing financial statements and employee stock options are also monitoring costs.

Bonding Costs

Furthermore, an agent may commit to contractual obligations that limit or restrict the agent’s activity. For example, a manager may agree to stay with a company even if the company is acquired. The manager must forego other potential employment opportunities. Consider that implicit cost an agency bonding cost.

Residual Losses

Residual losses are the costs incurred from divergent principal and agent interests despite the use of monitoring and bonding.

Calculate agency costs when setting prices and start pricing for profit. If you want to price for profit, then download the free Pricing for Profit Inspection Guide.

Agency Costs Definition, Types of Agency Costs, Agency Costs

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Agency Costs Definition, Types of Agency Costs, Agency Costs

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Does Your Company Have an Advisory Board?

Does your company have an advisory board that meets with senior management on a periodic basis? If you don’t, then why not? This past week I spent 5 hours in a advisory board meeting that we scheduled to last 2.5 hours. We spent that time not because the management asked us to, but because we were accomplishing so much as a group that everyone didn’t want to quit. How did this company get so much out of a talented group of people for so little? Wouldn’t you like advice in taking your company through difficult or challenging times?

Does Your Company Have an Advisory Board?

About 3 years ago a client of mine approached me to be on an advisory board they were forming. It was to consist of six advisers in addition to senior management. We meet every quarter to discuss issues facing the president of the company and a recap of the accomplishments for the previous quarter.

After a year of getting as much out of the meetings to help our company as I was giving the client, I decided to form an advisory board for our company. We have been meeting for about two years. During this time, the advice given to me has paid dividends many times over.

I am surprised many companies and entrepreneurs don’t have their own advisory boards. There is a certain amount of vulnerability that comes with strangers looking at your financial results and criticizing you. However, the value that comes with the honesty is worth the pain. In 2009, you should consider forming an advisory board for your company. You will wonder why you didn’t do it sooner!

Does Your Company Have an Advisory Board

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Do You Know Who Your A-List Customers Are?

Do you know who your A-list customers are? I was in a board meeting last week when I heard an interesting story from one of the other board members. Mike recalled when he was a young man and developed an interest in electrical work. While continuing to work at his day job, Mike developed a skill for doing light (pardon the pun!) electrical work.

As time passed, the demand for Mike’s work increased. He would do odd jobs for people on the weekend and at night. He would install flood lights, ceiling fans and fixtures. In addition, friends and family would request favors which he was happy to do! As the request started pouring in Mike started keeping two lists; one for paying customers; the other for favors.

One day his brother-in-law asked if Mike would do a favor by installing a flood light for his father-in-law. Mike agreed and put the name on the list. Several months went by and the brother-in-law had not heard from Mike. When he asked Mike why he had not installed the light, Mike explained his two lists.

The first list was the A list. This list consisted of paying customers. The B list was for favors. Mike was happy to start working on the B list as soon as he had completed the A list. The brother-in-law thought for a moment, then said that he would like to be moved to the A list.

Do You Know Who Your A-List Customers Are?

Often, we lump our own customers together. We treat the loyal customer who pays promptly the same as the demanding customer who is never happy and pays slow! In fact, it is often the demanding customer who gets more of our attention.

The lesson of this story is that we should have an A list and a B list for our customers. The A list should consist of those customers that pay on time, value our services and refer our name. The B list is for customers that don’t value our services, dispute our fees and are late or slow paying our bills. We should constantly be increasing the length of the A list and shortening the B list.

Learn how you can be the best wingman with our free How to be a Wingman guide!

Do You Know Who Your A-List Customers Are?

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Do You Know Who Your A-List Customers Are?

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