FIN.7:4.4 - Convert operating value into the actual claim

An operating valuation covers the assets whose cash was modeled. Add a nonoperating asset only when it is excluded from those cash flows and belongs to the valued interest. Excess cash can qualify, but a reserve required to sustain operations cannot be removed without changing the forecast. Recover restrictions, ownership and realizability. A receivable already included in working-capital cash does not create an additional asset value to add afterward.

Subtract prior claims on the same date and basis. In a simple business this includes market debt; other cases may require preferred interests, noncontrolling interests, contractual obligations or other claims whose effects have not already been deducted. Their treatment depends on what the operating cash and ownership perimeter include. For example, cash flows from an entire controlled subsidiary cannot support an equity value attributable wholly to the parent when outside owners retain part of the claim.

Match the valuation treatment of leases, pensions and similar obligations with the cash forecast and comparable definitions. Do not subtract an obligation as debt while retaining a full duplicate charge for its settlement in the valued cash. Do not omit it merely because its label differs from a bank loan. FDM supplies an unresolved position; the actual valuation basis determines its financial treatment.

Translate aggregate equity value into the specific ownership rights being considered. Shares with different distributions, control or transfer conditions are not necessarily interchangeable fractions of one total. A minority or liquidity adjustment requires an economic and evidential basis and consistent prior treatment; applying a standard percentage can duplicate effects already in cash, comparables or the required return. FIN.9 then adds the buyer’s attainable combination effects and compares the actual price.