Problem about commercial and fiscal informative statements

Question

A court assigned to me (as an auditor and economist) a valuation of a market butcher’s. The butcher’s did not give any simple income statements or any valuable information that I could use in my valuation. This is a small business with just two workers, the owner and an apprentice. This kind of tax system exempts them of specific commercial and fiscal informative statements.

I think this is very significant to underline that the object of the valuation is not a company, but quite a business, a work position. Although this has recurrent customers the value of its tangible assets is only the value of its tools, like the premises are rented (I think this is impossible to value the intangible asset which is the work). Here discounting cash flows in not a suitable method in this case. In fact, I do not know that profession fits better the job which the court assigned to me.

Answer 1

In order to value the butcher’s like a business you must also forecast the flows this will give. As the butcher’s does not consider being a business with a high rate of growth, you can see how much the owner earned for all the ideas, during the past years (the raises in the cash holdings, when any).

From such quantity you must subtract a reasonable wage and the difference you acquire is the flow for the shareholder. Though, this is just for the case where such type of valuation results superior to the liquidation value (when the local or the leasehold assignment was very valuable).