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Level I – Introductory Business Valuation
The purpose of this course is to provide you with an introduction to business valuation as an area of specialized practice. By the end of this course, you will be comfortable with valuation terminology and methodologies, have a developing awareness of issues which require specialized valuation knowledge, and will be familiar with the roles that a CBV may take, and the issues accompanying such roles.
Module 1 provides you with an introduction to business and securities valuation as an area of specialized practice, valuation terms and principles, and the approaches to business value determinations. You will also be introduced to the wide range of roles which a CBV may take on. By the end of Module 1, you will be able to:
- Recognize common situations giving rise to a valuation;
- Understand the diﬀerence between open market and notional market valuations;
- Compare and contrast the concept of fair market value and other value-related concepts and terms, including price, fair value, and special interest purchasers;
- Understand and be able to discuss the diﬀerences in diﬀerent valuation approaches; and
- Select the most appropriate valuation approach in a given situation
Module 2 is divided into two parts. Part One is designed to familiarize you with the structure, mandate, Code of Ethics, Practice Standards and responsibilities of the CICBV. In Part Two, you will gain an understanding of the general steps and procedures commonly followed in conducting a valuation assignment, while learning about the ways in which engagement risk is heightened, and can be mitigated. By the end of Module 2, you will be able to:
- Have an in-depth understanding of principles in the CICBV’s Code of Ethics and of general standards of professional conduct;
- Understand and be able to discuss the diﬀerences in usage and content of the CICBV’s Practice Standards;
- Understand and be able to discuss the various phases of a typical valuation assignment, including areas of professional risk, and how to manage, mitigate, or prevent such risk; and
- Identify ethical and practice standards dilemmas in a set of case facts, and provide suggestions as to how to proceed.
In Modules 3 and 4, you will gain the technical knowledge necessary to prepare valuation calculations using an income-based valuation methodology. The other primary valuation methodologies (asset-based and market-based) are covered in the Level II — Intermediate Business Valuation course.
By the end of Module 3, you will be able to:
- Compare and contrast discount rates and capitalization rates, including their components and usage;
- Compare and contrast, and be able to perform professional and technically correct calculations of the unlevered and levered approaches including determining cost of capital and en bloc value under each; and
- Perform professional and technically correct calculations of cost of capital (using the build-up and CAPM methods) and further calculating weighted average cost of capital.
By the end of Module 4, you will be able to:
- Identify, discuss the concept of, and know how to incorporate into a value calculation, more common redundant assets
- Demonstrate an in-depth understanding of the methodology (including the rationale for choosing, and the mechanics and calculations) of common income-based valuation approaches, including the capitalization of maintainable earnings, the capitalization of maintainable cash ﬂows, and the discounted cash ﬂow method;
- Demonstrate knowledge of other approaches including: rule of thumb approach; dual capitalization of earnings/cash ﬂows; and adjusted present value;
- Perform professional and technically correct calculations using the valuation approaches noted above, taking into account case-speciﬁc factors; and
- Calculate and discuss the qualitative elements of intangible asset value/goodwill which may be inherent in a business (i.e. brand, customer relationship, trademarks etc.).
The purpose of Module 5 is to prepare you for the exam-writing process. It provides information about the structure of the exam, as well as tips for exam writing. It also oﬀers you four assignments and one case study, so you can apply your newly developed skills. It is strongly recommended that you complete each assignment and the case study, then go through the suggested solution and determine where you can improve your answer. This will greatly enhance your performance on the Level I — Introductory Business Valuation examination.