extraordinary expenditure items that are incorporated on the Expenditure side of the
Profit & Loss report that screen the true net profitability of the business.
Accountants for closely held SME Private Companies in the Australia setting include
these expenditure in the P & L reports to give their clients the most effective Tax
position.
To determine the “true” net profit position (called the Adjusted Net Profit) these
expenses are ‘added back’ to the reported P & L and a ‘weighted average’
methodology retrospectively applied for this period to reflect capitalisation of the
current recent fiscal history of the business being appraised.
This report is based on an analysis of the financials for the 2006 financial year as
well as for the 2005 & 2004 financial years respectively.
Risk Assessment
There are many areas of risk that can affect SME businesses and these can have an
effect on the ongoing Adjusted Net Profits of any business. Some areas of risk can
have a more marked effect on the ongoing operations and/or profitability of SME
businesses than others. This appraisal has quantified the ‘degree’ of risk inherent in
SME businesses according to their importance to the overall risk assessment of the
business as a whole by discussions with the current owners and research into the
Industry and Economic circumstances that surround this report. Risk Assessment
has been investigated in the following areas:
1. Continued Earnings Risk Assessment.
2. Company History Risk Assessment.
3. Company Growth Projection Assessment.
4. Competition Analysis and Assessment.
5. Business Growth Opportunity Assessment.
6. Barriers to entry for New Competition Assessment.
7. Customer Base Sensitivity Assessment.
8. Management Retention Projection Assessment.
©AVANTIA 2007
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