Income Based Valuation of IT Companies: Methodological Issues Related to Invested Capital

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F29142890%3A_____%2F15%3A%230000179" target="_blank" >RIV/29142890:_____/15:#0000179 - isvavai.cz</a>
Alternative codes found
RIV/61384399:31110/15:00049175
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Income Based Valuation of IT Companies: Methodological Issues Related to Invested Capital
Original language description
IT companies´ valuation is a difficult task for various specific characteristics of their nature and operational business model. It is well know that basic measures of financial analysis such as ROCI (Return on Capital Invested) will fail since there isusually no need for high capital investments (CAPEX). If the venture is profitable, the profitability of investments and the whole capital employed (derived from accounting figures) would never converge towards the cost of capital. This is economically without any reasonable explanation and hence unsustainable. The reason is, as we argue in this paper, the absence of identifiable intangible assets (marketing model, domain names etc.) which are plentiful in IT companies on the company´s balance sheet. Thus we pledge for their ?accounting activation? bringing the economic rational of the DCF (and EVA) modelling approach will eventually apply also for IT companies with its specifics.
Czech name
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Czech description
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Publication year
2015
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Financial Management of Firms and Financial Institutions 10th International Scientific Conference
ISBN
978-80-248-3865-6
ISSN
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e-ISSN
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Number of pages
11
Pages from-to
380-390
Publisher name
VŠB - Technical university, Ostrava
Place of publication
Czech Republic
Event location
Czech Republic, Ostrava
Event date
Jan 1, 2015
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
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