Sanity check — When to use the excess earnings method
$225.00
Description
Abstract: The IRS developed the excess earnings (or formula) method in the 1920s as a way to compensate breweries and distilleries for intangible value lost during the Prohibition era. Appraisers still use this method to value businesses in a variety of industries. This article outlines the fundamentals of the method and notes its benefits and pitfalls. The article points out that, while this method is rarely used as a sole method of valuation, it may provide a useful sanity check for other methods.
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