Honors Theses and Capstones

Date of Award

Spring 2017

Project Type

Senior Honors Thesis

College or School

PAUL

Department

Accounting and Finance

Program or Major

Business Administration - Accounting and Finance

Degree Name

Bachelor of Science

First Advisor

Le (Emily) Xu

Second Advisor

Jeffrey Sohl

Abstract

There are a variety of widely accepted methods that are used in order to evaluate the financial positioning of companies that are traded on stock exchanges. However, these methods that are common in the public markets do not suffice for assessing companies that are privately held. Attempting to devise an intrinsic value using anticipated cash flows is ineffective given that most companies are pre-revenue. Deriving a value based off of assets held is also inaccurate given that a young company will be in the process of capitalizing itself and more of its assets cannot be represented on a balance sheet, compared to public companies. Furthermore, the sheer lack of raw data provided by the companies in some cases can also contribute to pitfalls in valuation attempts. In addition, the lack of reliability of private companies’ financial information makes the valuation of these companies difficult. This study aims to develop a framework to assess the financial reporting quality of these early stage private companies.

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