INPROFORUM 2013

DCF methodology: the application on the Czech agricultural companies
Kamila Růžičková

Language: cs
Last modified: 2013-11-01

Abstract


The financial management of companies inevitably belongs to the most important chapters of corporate finance, both theoretically and practically. The same importance refers to company valuation issues and effective management of the determinants of value. Recently, the thorough and precise knowledge of the internal economic processes within the company is essential for optimal financial management and employing available resources. This paper deals with the basic DCF framework for company valuation on the sample consisting from Czech agricultural companies. The current literature on income valuation of companies employs the discounting principle; either company’s expected cash flows or expected economic profits. All the expectations are based on the opinions of experts which are supplemented with objectified market information. The nature of such expectations is then reflected by the final statement on the company value.

This paper and its results highlight potential contradictions between profit and value of a company. These contradictions don’t have to necessarily stem from the nature of these indicators, but from the compromise application of the DCF valuation framework. All the resulting values are summarized in the four groups of the matrix and all the findings are compared. Finally, the recommendations on methodological framework and its adjustments are provided.


Keywords


Agricultural company, company value, discounted cash flow, financial management, profit

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