Business: Theory and Practice 8(3): 166-175, doi: 10.3846/btp.2007.24
Riskiness and Interdependencies of Business Value Variables
expand article infoVytautas Tvaronavičius
Open Access
Abstract
In business value calculations usualy great attention is given to the so-called discounted cash flows method. Here business risk estimation takes into account only the discount rate. This is a very general assumption, in which theoretically  all possible and probable risks should be reflected. In modeling business value dynamics that is not enough, because all business risks have individual and changeable probabilities. Business risks used in business valuation are without adequate estimation of probabilities. Trying to achieve increased business value should be based on reaserches, in which by modeling we obtain possibilities for value increasening based on value and its risk optimal relationship criterion. The aim of this research is to obtain impact of changing riskiness of diferent business risk drivers on business value, and to obtain impact of interdependence of diferent business risk drivers on business value. The results are expressed with probability density function of business value variable. Research results show that increasening of business value as the goal of each business could and should be analized together with value variable probability, i.e. with value risk criterion.
Keywords
valuation; value management; value riskiness; simulation; variables interdependence