Editorial Special Industries and Special Topics_14 docx

investors give little, if any, weight to book value in appraising the securities of companies with the high rates of earnings on capital that are characteristic of this industry. It should also be noted that we have not used a discounted future benefits approach because ABC’s prospective growth rates are roughly comparable to those of the guideline companies. The adjusted valuation ratios are, therefore, a reflection of both the growth rate and the capitalization rate appropriate to ABC Snack Foods, Inc., on the valuation date. Dividing the preliminary value of $62,382,000 by the 100,000 shares outstanding results in a freely traded value (the price at which the stock would trade in an active market) of $624 per share. The fact that the ABC stock lacks ready marketability must be reflected by a discount for lack of marketability. We think that a discount of 30% is appropriate. This results in a value for the common stock of $437 per share. It is our conclusion that a block of 20,000 shares had a fair market value of $437 per share as of March 31, 2009, or $8,740,000 for the entire block. 42.6 SOURCES AND SUGGESTED REFERENCES Blackman, L., The Valuation of Privately-Held Businesses. Probus Publishing, Chicago, 1986. Brown, Ronald L., Valuing Professional Practices and Licenses: A Guide for the Matrimonial Practitioner. Pren- tice-Hall, Englewood Cliffs, NJ, 1987. Burke, Frank M., Jr., Valuation and Valuation Planning for Closely-Held Businesses. Prentice-Hall, Englewood Cliffs, NJ, 1981. Ibbotson, Roger A., Stocks, Bonds, Bills and Inflation. Ibbotson Associates, Chicago, 1989. Internal Revenue Service, IRS Valuation Guide for Income, Estate & Gift Taxes. Commerce Clearing House, Chicago, 1985. , Revenue Ruling No. 59-60. U.S. Treasury Dept., Washington, DC. Maher, J. Michael, “Discounts for Lack of Marketability for Closely-Held Business Interests,” Taxes—The Tax Magazine, September 1976, pp. 562–71. Moroney, Robert E., “Most Courts Overvalue Closely Held Stocks,” Taxes—The Tax Magazine, March 1973, pp. 144–154. Pratt, Shannon P., ed., Readings in Business Valuation. American Society of Appraisers Educational Foundation, 1986. , Valuing Small Businesses and Professional Practices. Dow Jones-Irwin, Homewood, IL, 1986. , Valuing a Business, 2nd ed. Dow Jones-Irwin, Homewood, IL, 1989. Schackelford, Aaron L., “Valuation of S Corporations,” Business Valuation Review, December 1988, pp. 159–162. Schnepper, J. A., The Professional Handbook of Business Valuation. Addison-Wesley, Reading, MA, 1982. Smith, Gordon V., Corporate Valuation. John Wiley & Sons, New York, 1988. Standard & Poor’s Corporation, Standard Corporation Records. Standard & Poor’s, New York, annual update. 42.6 SOURCES AND SUGGESTED REFERENCES 42 • 27 [...]... period permits the debtor to hold lawsuits and foreclosures in status quo and to determine economic causes of its financial predicament while developing a plan Using the schedules of assets and liabilities, statement of affairs, and past and projected financial statements, the debtor and its accountant examine the liabilities of the debtor and the value of the business and explore sources of funding for the... approval) and also petitions the court to authorize such an appointment U.S trustees monitor applications for compensation and reimbursement for officers and accountants and other professionals retained in the case, raising objections when deemed appropriate Other responsibilities include monitoring plans and disclosure statements, creditors’ committees, and the progress of the case 43.4 HANDLING OF... PROCESSING OF CLAIMS Several accounting firms and other businesses have developed models to handle the processing of claims of both small and large debtors Some of their features include these six: 1 Capture of all the various formats of claims needed by the bankruptcy court 2 Information needed for management to review and evaluate each claim 3 Mailing lists and labels 43.5 OPERATING UNDER CHAPTER 11... ordinary course of business without a notice and a hearing As a result of this provision, the debtor may continue to sell inventory and receivables and use raw materials in production without notice to secured creditors and without court approval The use, sale, or lease of the estate’s property other than in the ordinary course of business is allowed only after notice and an opportunity for a hearing Under... accounting for bankruptcies and to increase the relevance of financial information provided to debtors, creditors, stockholders, and other interested parties who make decisions regarding the reorganization, especially the reorganization plan, of the debtor The SOP applies to financial reporting by companies that have filed Chapter 11 petitions and expect to reorganize as going concerns, and to companies that... garnishments, and attachments 5 Repossessions, foreclosures, and returns 6 Assignments and receiverships 7 Gifts 8 Losses 9 Payments related to debt counseling or bankruptcy 10 Other transfers 11 Closed financial accounts 12 Safe deposit boxes 13 Setoffs 14 Property held for another person 15 Prior address of debtor 16 Spouses and former spouses 17 Environmental issues 18 Nature, location, and name of... discriminate unfairly, and it must be fair and equitable with respect to each impaired class of claims or interest that has not accepted the plan The Code states conditions for secured claims, unsecured claims, and stockholder interests that would be included in the “fair and equitable” requirement It should be noted that because the word “includes” is used, the meaning of fair and equitable is not restricted... cash flow statements, and statements of financial position The creditors must be assured by the projected income statement and cash flow statement that the debtor will be in a position to make the payments as they become due The forecast of the results of operations and financial position should be prepared on the assumption that the proposed plan will be accepted, and the liability and asset accounts should... obtaining most of the outstanding stock of the company In the past 10 years, the creditors of public companies have received an increasing interest in the ownership of the debtor It is not unusual for the creditors to own between 80% and 95% of the outstanding stock of the emerging entity For example, Wickes’ creditors received 84% ownership, and the existing equity of Emmons Industries retained only... committee, the nature of the debtor’s operations, and the creditors’ committee confidence in the debtor and in the professionals—especially attorneys and accountants—who are helping the debtor The committee in most cases, to varying degrees, depends on the accountant to help evaluate the debtor’s operations, the information provided about those operations, and the terms of a proposed plan Often accountants . Preferential Payments 13 (h) Fraudulent Transfers 14 (i) LBO as a Fraudulent Transfer 14 (ii) Accounting Services— Search for Fraudulent Transfers 14 (i) Postpetition Transfers 14 (i) Adequate Value Received. and Bankruptcy Form 4. • List of Creditors. The debtor must file with the court a list of the debtor’s creditors of each class, showing the amounts and character of any claims and securities and, . Setoffs 14. Property held for another person 15. Prior address of debtor 16. Spouses and former spouses 17. Environmental issues 18. Nature, location, and name of business 19. Books, records, and