The Basic Language of Value

The word "value" means something of worth or usefulness. Language has evolved around this word over time within the disciplines of entrepreneurship, leadership, and management that is valuable to know.

***

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The basic language of value comprises the concepts of net worth and exchange.

Book value of assets, liabilities, and an enterprise

The value at which assets and liabilities are carried on a statement of financial position of an enterprise.



A statement of financial position shows the value of assets (resources for opportunities) and liabilities (obligations) at a point in time. The difference between the value of total assets and total liabilities is the owners' equity in "for profit" businesses, partners' capital in partnerships, and net assets in "not-for-profit" associations, or government entities. Equity is also referred to as net worth.

Net asset value is also the difference between the value of total assets and total liabilities less an adjustment in some cases for certain intangible assets that do not provide for economic opportunities in the future.

The basis for the valuation of assets and liabilities is determined by purpose according to financial, managerial, and regulatory accounting policies and principles. "Generally Accepted Accounting Principles" are promulgated by bodies designated by the American Institute of Certified Public Accountants.

For assets, valuation is based upon fair value when it is necessary to mark-to-market, or historical cost less depreciation, amortization, depletion, or impairment. For almost all liabilities, valuation is based upon fair value.

In theory, the book value of an enterprise represents what the shareholder investors collectively would receive in the event of a liquidation (less the costs to liquidate). However, the market value of the assets and liabilities may differ significantly from book value at liquidation.

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Fair value of an asset or liability

The value at which an asset or a liability could be bought or sold in an arm's length transaction in competitive markets based upon prices without concessions, financing, or incentives, when both the buyer and the seller are informed and are acting for their own best interests without the influence of third-parties; or an estimate when no established market exists.

Fair value is also referred to as exit value.

Item

An asset or a liability, or a product and/or service.

Market price

The price at which an item is offered in a marketplace for transactions.

Market value

The price at which an item would trade in an auction environment.

Capitalization

The book value of the equity of an enterprise plus the fair value of its long-term debt.


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Market capitalization

For a publicly traded enterprise, the market price per share of stock multiplied by the number of shares outstanding, including restricted stock, but not treasury stock. It is a measure of the market's perception of the value of an enterprise. Market capitalization fluctuates as market prices of shares change.

For private enterprises, the valuation has to be appraised because there is no public market for its equity, although there may be investors willing to buy part or all of the outstanding shares.

Equity value

The market capitalization of the enterprise adjusted for the dilution effects of warrants, options, and convertible securities (including bonds and preferred stock) less the conversion costs.

Enterprise value

The equity value of the enterprise plus the fair value of its long-term debt plus minority interests in affiliates less minority interests of affiliates and cash and cash equivalents.

Residual value

The value remaining in an item after use as characterized by the salvage or trade-in price.

Exchange

The process of offering an item and receiving another of the same or similar value.

Price

The exchange value offered by the seller for an item or earned based upon an accepted bid.

Cost

The exchange value bid by the buyer for an item or incurred when accepted - the value that must be given up to acquire an item.

Expense

That portion of cost that expires in an accounting period.

Direct cost

A cost that is traceable to an item.

Quality

The perceived value of an item by a prospect or customer at premium or discount from market price or market value. Perceived value is based upon a value proposition, augmented by abundance, convenience, scarcity, risk, and minimal defects.

Value proposition

A statement of benefits and differentiating features for the enterprise and its products and/or services.

Economic value

The difference between the exchange value and the cost of the value exchanged.

Earned value

In project or production work, the budgeted cost of work performed at standard or actual rates, or the actual cost of work performed if budgets are not used. The cost of work performed comprises fully loaded direct labor cost burdened with attributable project or production overhead.

Added value

The difference between the exchange value earned for an item and the actual cost of the work performed and the direct materials and supplies. Added value is analogous to gross profit.

Value added - technical

The cost of the effort applied to transform materials and supplies into a item of greater value, as measured by earned value.

Value added - economic

The additional value of a commodity over the cost at each stage of production.

Value added - perceptual

The value of an item as perceived by a prospect or customer above a baseline for a commodity.

Total value added

The earned value of an item plus the added value. The exchange value earned for an item equals the total value added plus the cost of direct materials and supplies when the actual cost of work performed equals the budgeted cost. If the actual cost of work performed is more than budgeted, then either both the added value and total value added are reduced, or the exchange value earned must increase by the variance to accommodate the loss in value caused by the overrun.

Value chain

The value added activities that earn value and add value to materials and supplies. The activities produce a component of a product, or a finished product and deliver it to a customer. The value chain is defined by a process/function model. The model represents the plan, whereas the chain represents reality.


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Understanding the basic language of value is an enterpriship (entrepreneurship, leadership, and management) competency.


...and to assess your enterpriship competencies in thirty minutes or less, claim your opportunity for instant access when you go to http://www.fromvisiontovalue.com

From Nigel A.L. Brooks
http://www.nigelalbrooks.com

Article Source:
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http://www.scribd.com/doc/32355878/The-Basic-Language-of-Value


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The Basic Language of Value

The word "value" means something of worth or usefulness. Language has evolved around this word over time within the disciplines of entrepreneurship, leadership, and management that is valuable to know.

***

Own A New Business
Set your own hours; reach your own goals
vitailia.ownanewbusiness.com




The basic language of value comprises the concepts of net worth and exchange.

Book value of assets, liabilities, and an enterprise

The value at which assets and liabilities are carried on a statement of financial position of an enterprise.

A statement of financial position shows the value of assets (resources for opportunities) and liabilities (obligations) at a point in time. The difference between the value of total assets and total liabilities is the owners' equity in "for profit" businesses, partners' capital in partnerships, and net assets in "not-for-profit" associations, or government entities. Equity is also referred to as net worth.

Net asset value is also the difference between the value of total assets and total liabilities less an adjustment in some cases for certain intangible assets that do not provide for economic opportunities in the future.

The basis for the valuation of assets and liabilities is determined by purpose according to financial, managerial, and regulatory accounting policies and principles. "Generally Accepted Accounting Principles" are promulgated by bodies designated by the American Institute of Certified Public Accountants.

For assets, valuation is based upon fair value when it is necessary to mark-to-market, or historical cost less depreciation, amortization, depletion, or impairment. For almost all liabilities, valuation is based upon fair value.

In theory, the book value of an enterprise represents what the shareholder investors collectively would receive in the event of a liquidation (less the costs to liquidate). However, the market value of the assets and liabilities may differ significantly from book value at liquidation.

Fair value of an asset or liability

The value at which an asset or a liability could be bought or sold in an arm's length transaction in competitive markets based upon prices without concessions, financing, or incentives, when both the buyer and the seller are informed and are acting for their own best interests without the influence of third-parties; or an estimate when no established market exists.

Fair value is also referred to as exit value.

Item

An asset or a liability, or a product and/or service.

Market price

The price at which an item is offered in a marketplace for transactions.

Market value

The price at which an item would trade in an auction environment.

Capitalization

The book value of the equity of an enterprise plus the fair value of its long-term debt.

Market capitalization

For a publicly traded enterprise, the market price per share of stock multiplied by the number of shares outstanding, including restricted stock, but not treasury stock. It is a measure of the market's perception of the value of an enterprise. Market capitalization fluctuates as market prices of shares change.

For private enterprises, the valuation has to be appraised because there is no public market for its equity, although there may be investors willing to buy part or all of the outstanding shares.

Equity value

The market capitalization of the enterprise adjusted for the dilution effects of warrants, options, and convertible securities (including bonds and preferred stock) less the conversion costs.

Enterprise value

The equity value of the enterprise plus the fair value of its long-term debt plus minority interests in affiliates less minority interests of affiliates and cash and cash equivalents.

Residual value

The value remaining in an item after use as characterized by the salvage or trade-in price.

Exchange

The process of offering an item and receiving another of the same or similar value.

Price

The exchange value offered by the seller for an item or earned based upon an accepted bid.

Cost

The exchange value bid by the buyer for an item or incurred when accepted - the value that must be given up to acquire an item.

Expense

That portion of cost that expires in an accounting period.

Direct cost

A cost that is traceable to an item.

Quality

The perceived value of an item by a prospect or customer at premium or discount from market price or market value. Perceived value is based upon a value proposition, augmented by abundance, convenience, scarcity, risk, and minimal defects.

Value proposition

A statement of benefits and differentiating features for the enterprise and its products and/or services.

Economic value

The difference between the exchange value and the cost of the value exchanged.

Earned value

In project or production work, the budgeted cost of work performed at standard or actual rates, or the actual cost of work performed if budgets are not used. The cost of work performed comprises fully loaded direct labor cost burdened with attributable project or production overhead.

Added value

The difference between the exchange value earned for an item and the actual cost of the work performed and the direct materials and supplies. Added value is analogous to gross profit.

Value added - technical

The cost of the effort applied to transform materials and supplies into a item of greater value, as measured by earned value.

Value added - economic

The additional value of a commodity over the cost at each stage of production.

Value added - perceptual

The value of an item as perceived by a prospect or customer above a baseline for a commodity.

Total value added

The earned value of an item plus the added value. The exchange value earned for an item equals the total value added plus the cost of direct materials and supplies when the actual cost of work performed equals the budgeted cost. If the actual cost of work performed is more than budgeted, then either both the added value and total value added are reduced, or the exchange value earned must increase by the variance to accommodate the loss in value caused by the overrun.

Value chain

The value added activities that earn value and add value to materials and supplies. The activities produce a component of a product, or a finished product and deliver it to a customer. The value chain is defined by a process/function model. The model represents the plan, whereas the chain represents reality.

Understanding the basic language of value is an enterpriship (entrepreneurship, leadership, and management) competency.

....and to assess your individual competencies in thirty minutes or less, claim your opportunity for instant access when you go to
http://www.individualcompetencies.com

From Nigel A.L. Brooks - Management Consultant and Motivational Speaker http://www.nigelalbrooks.com

Article Source: http://EzineArticles.com/?expert=Nigel_Brooks


Nigel-Brooks_217756


http://www.etailia.com




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