07 Apr Valuing Assets: Part 3
by George D. Abraham
CEO & Chief Appraiser
Business Evaluation Systems
DEFINITIONS OF CONDITIONS
Care must be taken in assignments of condition ratings to accurately reflect the impact on value
EXCELLENT
New/near new or practically new mechanical condition, extremely low hours of use, no defects, and may still be under warranty.
VERY GOOD
Exceptionally good condition. May have just recently been completely overhauled or rebuilt with new or near new materials and/or has had such limited use that no repairs or worn part replacements are necessary. Very low hours of use.
GOOD
In complete 100% operating condition. No known or obvious mechanical defects but may have some minor worn parts that will need repair or replacement in the near future. May have high hours of use but no defects are obvious.
FAIR
Has very high hours or extended use. Defects are obvious and will require repair or general rebuild soon. Not 100% functional or efficient, may be operational or functional but questionable.
POOR
Has seen very hard and long hours of service. Requires rebuild, repair, or overhaul before it can be used. Not operational or functional.
SCRAP
Cost of repair exceeds value or cost or replacing with like equipment. Past useful or functional life and should be sold as scrap.
Tomorrow’s blog entry will complete this article with a discussion about how to determine conditions.
The above article was written by George Abraham, an experienced business broker who is now a well-known business appraiser. Since 1973, Business Evaluation Systems has been involved in the appraisal of over 16,000 companies, covering almost every industry on a national and international basis, ranging in value from $50,000 to over $7 billion. The firm provides third-party valuations as well. For more information go to: www.BESappraisals.com
