The
valuator must also decide which standard of
value to use. The most common standard of
value to use is fair market value - the price
that would apply when a willing buyer and
willing seller have reasonable knowledge of
the relevant facts and neither is acting under
compulsion.
A
valuator considers many factors in determining
fair market value, including the nature, history
and economic outlook for the business and
its industry; the business's financial condition;
the company's earnings and dividend (paying
capacity); and whether the business has goodwill
or other intangible value.
Don't
confuse "fair market value" with
"fair value," another frequently
used standard of value. A court or regulatory
agency typically establishes fair value, usually
developed from case law, and it varies from
state to state. A determination of fair value
often becomes necessary in an irreconcilable
dispute, such as a dissenting stockholder
action.
