Publication detail

Prediction of economic growth to determine the growth rate of business value

SRBOVÁ, P. REŽŇÁKOVÁ, M.

Original Title

Prediction of economic growth to determine the growth rate of business value

Type

conference paper

Language

English

Original Abstract

The aim of this paper is to describe approaches to determining the growth rate of two-stage discounted cash flow valuation method and to propose possibilities to refine its prediction. Business value is given by a set of business-economic variables, so-called value drivers; one of which is the growth rate. The determination of the growth rate is based on an analysis and prediction of macroeconomic factors and on the company’s internal factors. According to our research the value of an enterprise is very sensitive to changes in the growth rate. Therefore, we believe the issue requires closer attention. The growth rate as a value driver is commonly derived from the GDP growth rate, which characterizes economic cycles. In literature this is often identified with business cycles. Authors of this paper deal with GDP prediction and possibilities of using composite indicators to determine the growth rate of cash flow, specifically to refine the first phase prediction. Composite indicators are used to predict the development of economic cycles and their use is therefore particularly suitable for pro-cyclical sectors. Another possibility of using composite indicators is to incorporate partial factors directly into business valuation models. In particular, we see the benefit of using composite indicators in their better accessibility. For the purpose of our analysis we use the Pearson correlation coefficient to determine the correlation between the GDP and the selected industry from 2007 to 2017 or the composite indicator, the logarithmic difference to analyse economic cycles and the mean deviation value to compare the GDP prediction with the real GDP.

Keywords

business value, discounted cash flow, growth rate, business cycle, composite indicator

Authors

SRBOVÁ, P.; REŽŇÁKOVÁ, M.

Released

22. 8. 2019

Location

Brno

ISBN

978-80-210-9338-6

Book

European Financial Systems 2019, Proceedings of the 16th International Scientific Conference

Pages from

560

Pages to

567

Pages count

8

URL

https://is.muni.cz/do/econ/sborniky/2019/

BibTex

@inproceedings{BUT157703,
  author="Pavla {Srbová} and Mária {Režňáková}",
  title="Prediction of economic growth to determine the growth rate of business value",
  booktitle="European Financial Systems 2019, Proceedings of the 16th International Scientific Conference 
",
  year="2019",
  pages="560--567",
  address="Brno",
  isbn="978-80-210-9338-6",
  url="https://is.muni.cz/do/econ/sborniky/2019/"
}