AboutLeo Lingham Expertise In Managing a business, I can cover all aspects of running
a business--business planning, business development, business auditing, business communication, operation management, human
resources management , training, etc.
Experience 18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.
PLUS
24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.
Expert: Leo Lingham Date: 4/16/2008 Subject: Business valuation
Question Hello Leo, Are the income tax returns part of a business valuation. In other words, I'm trying to incorporate my small business and my sales for every year are great. However, when it's time for the year end taxes, my CPA usually deducts every single possible tax deduction known, which in turn reduces in a way the profits so I pay little less in taxes.
My question is do my income taxes need to be included in a business valuation?
Please advise,
Thank you
Alex
Answer Alex
1. INCOME TAX RETURNS ARE JUST THAT----- THE TAX RETURNS.
-we do lots of jugglings with it to reduce tax payments and
hence do not relect the true strength of the company.
2.FOR BUSINESS VALUATIONS, IT IS A SEPARATE EXERCISE.
WE OFTEN USE ----EBITD.
Earnings Before Interest, Tax, and Depreciation - EBITD
An indicator of a company's financial performance calculated as:
= Revenue - Expenses (excluding tax, interest, and depreciation)
Notes:This is all profits, operating and non-operating, before deducting interest, income taxes, and depreciation.
THIS TRULY REFLECTS THE WHOLE STORY
OF YOUR BUSINESS AND ITS MARKET VALUE.
THE FINANCIAL ANALYST, WHEN THEY EVALUATE
YOUR BUSINESS, THEY WILL CONSIDER OUR COMPANY ''EBITD''
IF YOUR EBITD IS SAY ------1 MILL DOLLARS
THEY MIGHT VALUE YOUR BUSINESS BETWEEN
[5---7 ] TIMES YOUR EBITD.
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REGARDS
LEO LINGHAM
