Property valuation is a very popular service in relation to other types of valuation. It may be necessary in a variety of situations – with collateral, insurance, contribution of fixed assets to the authorized capital or reorganization of the company. Read more @ goldcoastpropertyvaluers.com.au.
Also, when preparing financial statements according to standards, an assessment of fixed assets, which causes difficulties for the accounting and financial departments of any company, as this imposes additional labor costs on them and goes beyond their competence.
The development of standardization and the regulatory framework, pulling them up to international standards puts in a more favorable position those property valuation companies that prefer the control and thorough analysis of their fixed assets and funds.
First of all, the assessment of fixed assets is the compilation of adequate strategic objectives, and also makes it possible to make only objective decisions based on reliable information.
Worse than poor or inaccurate property valuation, there can only be errors in tax returns and tax evasion.
Why is the property valuation?
Property valuation and its impact on the break even of the company.
Property valuation has a direct impact on the provision and control of the break-even activity of the enterprise. In the presented report on the property valuation , depreciation deductions are clearly traced, which in the absence of property valuation, or vice versa, imaginary revaluation can increase – and this, in turn, conditionally fixed costs.
An increase in expenses, and their share in the cost of production, leads to an increase in the risk of loss of profit (and constantly) and a decrease in stability with a decrease in sales (the so-called “effect of production leverage).
Thus, conducting a qualitative assessment of fixed assets has a positive impact on your organization, reducing losses.
I would also like to say that over-depreciation causes serious problems with the sale of products. So, if the property valuation has not been carried out for a long time, and, as a result, there is an “imaginary” increase in depreciation, in order for the company to break even, it needs to increase its sales or raise the price of products – and this is not always advisable and fit.
The way out of this situation is the assessment of fixed assets , with which it is already possible to determine the amount of acceptable risk and create an effective cost management system.
Property valuation and its impact on company performance.
Today, five groups of indicators can be distinguished by which we can characterize the property valuation company‘s activities:
- Indicators of business activity of the company;
- Profitability indicators;
- Liquidity ratios;
- Capital structure indicators;
- Indicators of the market value of the company’s capital.
The Property valuation ultimately has a direct impact on all of these indicators.
The change in profit due to the increase in the cost of the company, which occurs due to an increase in depreciation, affects the profitability of the company. An increase in equity reduces the need for borrowed capital to finance existing assets.
This increases the liquidity of the company and its financial independence. In the case of an increase in depreciation, it is likely that the value of income per share will decrease – but if the Property valuation coincides with the strategic objectives of the enterprise, then it provides a significant exchange rate growth of shares. As a result, the cost of equity increases.
Also, the Property valuation allows more efficient management and identification, as well as take into account fixed assets that are or are not already used in the organization. Cost reduction, cost reduction – these are the main goals that are pursued by the assessment of fixed assets of the enterprise.