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Does company value matter? | Credence & Co.

Updated: Oct 26, 2023


Does Company Value Matter | Corporate Evaluation Matter

Does company valuation and corporate evaluation really matter to you?

We often hear about companies that were financially superior for several years, then failed after a short period due to their administrative weakness, and others that were distinguished administratively and economically, and whose profits appear above their competitors, and then do not continue, due to several reasons, foremost of which is the lack of financial evaluation.


Company Valuation or corporate evaluation is a method used to determine the company's financial position in the local market. It is defined as a method used by financial analysts and management accountants to know the total financial value of the company. It is related to determining the value of assets, liabilities, and any other financial restrictions arising On the company, pointing out that the evaluation of companies aims to determine their financial position and to know the extent of their ability to continue in the economic market within their field of work.

Corporate Evaluation

Valuation steps

There are steps that are taken to evaluate companies in a correct manner, which are preparing a list that includes all the external and internal contents of the company, taking care to add information related to the company, whatever its nature, and then using one of the methods of evaluating companies, to begin setting the stages that will be relied upon in evaluating the company. Knowing the company's financial situation, the value of its capital, and shareholders' shares in the capital, followed by studying the company's legal status by seeking the assistance of a law expert to ensure the application of legal texts to the nature of the company's work.


Known methods

There are common methods for evaluating companies, which are:

  1. "Valuation at net book value", which is a method for evaluating companies based on the value of their net assets after collecting all kinds of liabilities, whether they are debts or unpaid financial obligations, and

  2. "Valuation at adjusted book value". It is the method that recalculates the values of assets and liabilities in companies and compares the actual and book values by linking them to a set of economic influences, such as the rate of inflation net shareholders' equity, and then works to adjust the book values to the real or actual values that have been reaching it.

  3. The "Valuation by replacement value" method explains that it is a method that links the company's capital when it was established with its capital at the present time and depends on the company's evaluation by relying on linking its state when it was established with its current capital. That is, it replaces the current situation of the company with its previous situation, so this method is considered one of the evaluation methods that many analysts and financial accountants criticize.

  4. As for the "Cash flow valuation" method, it is the method that relies on formulating a set of suggestions and predictions about the company's financial position by studying the financial details related to cash flows. Any financial operations that take place within the company, such as buying and selling and other operations. This method of evaluating companies is considered one of the most widely used evaluation methods.

Benefits of Corporate Evaluation

  1. It contributes to determining the net value of private property rights in companies.

  2. Determine the value of companies' obligations, expenses, and debts.

  3. It helps determine the value of the company's shares before offering them on the financial market for trading.

  4. A means to support the process of merging companies.

  5. Provide real values for the shares of partners in joint stock companies, especially if one of the partners wants to sell his share.

Once your business' valuation has been proven, you can set goals to develop the company's value over the next year. Then, every year, you should set time aside to compare the previous years' valuations to measure growth losses and notice where room for improvement is. There are three main types of valuations, and companies should take advantage of the opportunity to complete all three annually.


At Credence & Co., we strongly believe that business valuation is a vital component of any business. With our wealth of experience, knowledge, expertise and resources, including access to comprehensive databases, historical data sources and tools, we are confident to provide an expert opinion to help you make informed business decisions.


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  • Email us at info@cnco.ae, or

  • Call us at +971 (4) 8790 747 or +971 (52) 129 2768

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