BY
DECLARATION BY STUDENT
I GAURAV BHAURAM JADHAV, ROLL NO.14-7280, The student of
M.Com (Accountancy) Semester2(2014),K.V.PNDHARKAR COLLEGE,
Date :
Roll No : 14-7280
Name : Gaurav B Jadhav
ACKNOWLEDEMENT
WHO
HELPED
ME
DIRECTLY OR
INDEX
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The objectives of our project is To find out the meaning of Goodwill & Shares.
To find out its importance in corporate sector.
To study how to find out its value.
To study about its different methods.
To find out its use in different corporate sector.
d. When whole of the partnership firm is sold out to any other firm or person.
e. When a partnership firm is converted into a company.
f. When there is a case of amalgamation of two firms.
Companies: In case of a company, the need for valuation of goodwill may arise
in the following circumstances:
a. When there is a situation of amalgamation of two companies.
b. When the business of the company is sold to another existing company.
c. When one class of the shares is converted to another.
d. When a company acquires the controlling interest in the company and becomes
a holding company.
e. When there arises a need for the valuation of the shares of the company.
f. When shares of the company are not listed on the stock exchange and they have
to be valued for taxation purposes.
B. No. of years purchased of Average Profit Method:Goodwill = Average Profit * No. of years Purchased
C. Annuity of Average Profit Method:Goodwill = Average Adjusted Annuity Value Net Tangible Asset
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A. No of years purchased of super profit method:Goodwill = Super Profits * No. of years purchased
B. Annuity of super profit method:Goodwill = Super Profit * Annuity Value
C. Capitalization of super profit method:Goodwill = Super Profit * 100/N.R.R
D. Sliding Scale of super profit method:Goodwill = Super Profit * No. of years purchased
Where Super Profit is calculated in the following manner,
Step 1 :- Calculation of Average Profit
Step 2 :- Calculation of Normal Profit (Capital Employed *N.R.R/100)
Step 3 :- Calculation of Super Profit (Average Profit Normal Profit)
Valuation of Shares
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Types of Shares
1. Ordinary Shares : Most shares traded on ASX ordinary shares. Ordinary
shares carry no special or preferred rights. Holders of ordinary shares will
usually have the right to vote at a general meeting of the company, and to
participate in any dividends or any distribution of assets on winding up of the
company on the same basis as other ordinary shareholders.
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specified future date or dates , the company is entitled to call for all or part of the
outstanding issue price, and the shareholder at the time the call is due is legally
obliged to pay the call.
1. The basic or principle factor in the valuation of shares is the dividend yield that
the investor expects to get as compared to the normal rate prevailing in the market
in the same industry.
2. Growth prospects of the company.
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market value of all Assets & Liabilities to be paid for. Assets & Liabilities
recorded or unrecorded in balance sheet at present value are to be
considered.
Intensic Value per = Amount available to eq.shareholders
Per eq. share
No. of eq. shares
2. Yield Value Method :- It is also referred to as Market Value Method. This
method is based on assumption that the company is a growing concern. It
will continue its activities year after year Therefore, value of a share is
based on the amount of profit that would be available to eq. shareholders for
dividend.
Yield Value per = Rate of F.M.P * Paid up value per
Eq. share
N.R.R
eq. share
3. Fair Value Method :Fair Value per = Intensic Value per share + Yield Value per share
Eq. share
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4. Earning Capacity Method :- Under this method, value of share is decided
on the basis of earning capacity of a company. The majority shareholders are
interested in disposable profits.
Earning Value per = Rate of Earning * Paid up value per share
Eq. share
N.R.R
Where,
Rate of earnings = Earnings (profit earned)
Capital Employed
5. Capitalization of F.M.P Method :16
* 100
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* 100