Comment, question or quotation of the day

13-12-2019 : Question from a student

What methods can be used to value a restaurant or an hotel or a local grocery store?   As they are small entities, they are very often valued according to shopkeeper rules, without contempt, i.e. on the basis of X times a week's turnover. There are indeed tables and recommendations from the tax authorities in this area based on thousands of sales observations.   For these small businesses, forget about discounting free cash flow, there is no business plan and the published result rarely corresponds to an economic reality because often the operator is partly remunerated by expenses that he or she should bear personally but that are charged to the business. For example, the gas tank in the grocery store's wife's car is charged to the grocery store with the gas tank in the van used to make deliveries... Therefore, turnover is often a more reliable indicator of the result than the result itself! Hence the basis of a multiple of turnover to value these very small companies with often identical margin rates, because they all support approximately the same cost structure. Have a good day

12-12-2019 : Quote of the day

“Recipe for sleepless nights: invest blindly in a hedge fund.”        The Financial Times



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The Vernimmen.com Letter

Number 124 of November 2019

News : Financial analysis of listed groups in West Africa

Statistics : Liquidity and debt of top 60 groups worldwide

Research : CSR and competition: can socially responsible companies survive?

Q&A : How can a borrower manage the duration of a bond flexibly?

COMMENTS : Comments posted on Facebook