Glossary Terms

The current cost of a similar new asset or property having the nearest equivalent utility to the asset or property being valued.

The current cost of an identical new asset or property.

The minimum rate of return acceptable by investors before they will commit money to an investment at a given level of risk.

A financial provision for recognizing the reduction in value of assets over their estimated useful life. This is done by making regular additions to a fund sufficient to meet the estimated cost of additions to and replacements of the fixed assets when they come to the end of their useful… Read More »Reserve For Replacement

The prospective value as of the end of the discrete projection period in a discounted benefit streams model. It is also the amount that a company expects to receive for an asset at the end of its service life less any anticipated disposal costs.

The amount, expressed as a percentage, earned on a company’s common equity for a given period.

The amount, expressed as a percentage, earned on a company’s total capital for a given period.

A process used by investors (commonly private equity firms) where multiple small companies in the same market and/or industry are acquired and merged. The principle aim of a rollup is to reduce costs through economies of scale. (also Roll-up or Roll up)

A mathematical formula developed from the relationship between price and certain variables based on experience, observation, hearsay or a combination of these; usually industry specific. A rule of thumb is a common procedure or practice to empirically value a business. These procedures are based on past valuation experiences and estimates… Read More »Rule of Thumb

When the person selling a business offers financing to a buyer instead of or, in addition to the buyer finding third-party financing.