Search

This paper offers business owners a step-by-step valuation process for establishing the fair market value of their firms and stresses the importance of preparing for the due diligence process.

The due diligence process enables investors to do a better job of determining the appropriate price to pay for a privately held firm. This article delineates some factors that a prospective buyer should investigate thoroughly to determine the value of a small, privately held business under consideration for purchase.

The traditional approach to teaching a course in investments is predicated upon the efficient market hypothesis, modern portfolio theory, and the assumption that decision-makers are rational, wealth optimizing entities. Recent developments in the arena of behavioral finance (BF) have raised questions about this approach. Although the idea of efficient markets is widely accepted in academic circles, financial markets often fail to behave as predicted by the theory. For the teacher of undergraduate investments, these divergent views create significant pedagogical challenges and opportunities. BF has particular implications for investing in financial markets, where the faith in rational behavior is perhaps the greatest. This paper identifies alternative strategies for dealing with these issues in the classroom.