Marginal Value in Business

Business Economics - A Library of InformationINTRODUCTORY SLIDESHOW

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Create more wealth by utilizing the concepts of marginal value.  Learn how to identify and maximize triggers in your business operation.  Use this information to generate feedback that automatically corrects business shortcomings.

This section is dedicated to increasing the value of your business.  You must first understand the basic formula used by business brokers, CPA’s, and authorities in valuing a business.  From this basic understanding you can then make major adjustments to those areas of the business to make significant changes in the value of your  business.  In addition learn how to tweak the little items and make large value changes in the overall sales price of your business.

Please understand that these are business related articles and are in-depth and educational in nature.  The primary goal of each article is to educate and provide insight, guidance and knowledge to the small business entrepreneur.

FEATURE ARTICLES:

  • Union Pacific – Buy/Sell Model

    Union Pacific’s stock carries the highest price to book ratio among the six Class I Railways. It is about a 1.43 times factor over the next best price to book ratio of CSX at 4.73. Strong price to book ratio investments infrequently have deep or extended price depressions. Therefore, an investor must be ...
  • Canadian Pacific Railroad – Sold Stock at $241.47

    Canadian Pacific Railroad - Sold Stock at $241.47Today is November 15, 2019 and Canadian Pacific Railroad recovered in accordance with my railroad fund investment model to $241.47 per share. The value investing model automatically sold at $241.47 and the price per share continued to climb to $241.86 when the market closed at 4 PM.  This sale generated a 9.31% return on the investment ...
  • High Price to Book Ratios – Proper Interpretation and Evaluation

    High Price to Book Ratios - Proper Interpretation and EvaluationWith stock investing, one of the valuation ratios used is the price to book ratio.  It identifies the spread between book value and market value for a share of stock.  As the spread increases the ratio increases.  A good example is Coca-Cola. Its price to book ratio hovers in the 11 range.  Coca-Cola is a ...
  • EBITDA – Drawbacks

    EBITDA - DrawbacksThere are several business financial attributes required for EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to work well as a basis for the multiple of earnings method (the method used with the Market Comparable Valuation Approach); see Fair Market Value  for a better understanding of the three primary business valuation approaches.
  • EBITDA – Buyer Beware (Case Study)

    EBITDA - Buyer Beware (Case Study)This article will illustrate the opposite effect using the same business information.   A buyer of a business should be leery of financial information and look for improper accounting processes.   The goal is to reduce the operational income and ultimately the value of the business.   The goal is to get the business valuation ...
  • EBITDA

    EBITDAEBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization.   The value is generally known as operational profit before capital expenditures and tax obligations.
  • Fair Market Value

    Fair Market ValueValue at the individual level is strictly personal.  But as more buyers for the same item come into play the price of the item begins to stabilize.  If there are hundreds of thousands of buyers, the price reaches a high level of consistency or what is called ‘Fair Market Value’.
  • Marginal Revenue in Business

    Marginal Revenue in BusinessThe scholarly definition and reality are two different perspectives.  The student is taught that marginal revenue equals the additional dollars generated for an additional single unit of sales.  It is literally taken right down to the micro measurement.  This is simple to understand but in small business, the scope of its meaning and impact are ...
  • Business and Industry Growth

    Business and Industry GrowthThe second most weighted factor in the risk multiplier series for the Discretionary Income Multiplier Formula is business and industry growth.  This factor evaluates the overall change in an industry and in particular the business under review over the most recent three years.
  • Stability of Historical Earnings

    Stability of Historical EarningsNo other element of the Multiply Discretionary Income Formula has as much weighted value as the historical earnings of the company.  Every knowledgeable business entrepreneur, accountant, lawyer, broker, you name them; they look for this information first.  There’s a reason for this.
  • Focus Groups – Adding Real Value to Your Business

    Focus Groups - Adding Real Value to Your BusinessI often wonder how a business could get better if it didn’t know what being the best meant.  How could a small business entrepreneur determine he was indeed performing at or above the industry standard if there was no information available to say what was the best, average or poor?  There isn’t any real performance ...
  • Calculating the Value of a Business – Discretionary Income Multiplier Formula

    Calculating the Value of a Business - Discretionary Income Multiplier FormulaIn the world of small business, the sale of a business is dependent on two critical elements.  They are DISCRETIONARY INCOME and the BUSINESS RISK MULTIPLIER.  These two elements are multiplied to create the overall value of the business operation.  In general, no small business operation is worth more than three times the discretionary income.
  • The Cost of One Putt

    The Cost of One PuttUsing a large database, I calculated the average cost of one putt for each professional golfer. In business, this is known as the marginal cost of doing business.

 

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