A Business Valuation Study Of The Cyclical Industry Based On COSCO

Since the financial crisis happened in2008, the gloabal economy ended a longperiod of rapid development and proserperity. Although global government had takemany stimulus policy, the the global econmy’ trend has been downwad. Besides theOCED countries,the growth of the BRICS has slowen down. The urgent questons ofChina is to upgrade and transform the mode of economic growth. In China,there areseverly overcapacity in some industries, like ship, iron, cement, electrolyticaluminum, and flat glass. If the question cannot be solved, it will cause Seriousconsequences, such as unemplymenrt, bad loans of bank, energey shortage,enviromnetal degradation,enventually hurting the harmony and the transformation ofeconomic growth.The industries with overcapacity are mainly cyclical and stragetic indusries,because they have large elasticity of demnad, small elasticity of supply, long periodof consructing and large scale of investment. The development of cyclical indusriesare affected by the cycle of world macroeconomic and industry, so the value of theseindusries have sigificant improtance and complexity. The traditional method of assertvaluation in cyclical industries are challenged in assumptions and basic theory and soon, therefore we should adjust and improve the traditional method to adapt the neweconomic environment.Therefore our topic is studying the business valuation in cyclical industry, Iattempt to provide some reference to solve the overcapcity in cyclical industry andasses the business valuation in cuclical industries of China.To study the topic of the dissertation, the combination of theory and casemethod are adopted.First, I analyzes the relevant reference and theory, andintroduced traditional evaluation methods. Then I analyzes the charactiteristics anddifficulties of cycliccal industry enterprises valuation, proposed the deficiencies inthe traditional valuation method,and recommended methods for improvement andadjustment of business valuation in cyclical industries. In the next,I take the exampleof the typical industry—shipping, analyzed the the cyclical characteristics of theshipping, for supporting the next case study.Next part is case study an analysis,Iapply the improved income approach to the case of China COSCO, the appoach iscombined with scenario anlysis and staging companies DCF, and it will provide auseful solution ides for the valuation and managemnet of cyclical enterprises.The last part of the paper is conclusions and deficiencies.The characteristics and innovation of the paper is as follows:Firstly, through the analsis of suitable basis,assumption and applicability oftraditional business valuation method,we found the traditional methods such as costapproach.market approach and income appoach are faced with seriou challenges inassessing the value of cyclical enterprise when cyclical fluctuation in the economyhappened.Secondly, in assesing the value of companies in cyclical industries, we ratonallyuse scenario analysis method to effectively reduce the uncertainy in cyclical businessvaluation. Though the anlasis of differenc scenarios of China COSCO businessvaluation, the CPV can help some cyclical companies like China COSCO cope withmacroeconomic cycle riks, changes the extensive mode of economic growth,improve management and strategic decision–making, assist the company continue toreform and strengthen the innovation and provide professional services foraccelerating the transformation of economic growth.