Forensic Update

Reflections on information management within the legal and regulatory arena

Business damages measurement: Lost profits or business valuation?

Posted by Johnny Lee on January 26, 2011

In business litigation matters, financial experts are often asked to provide an opinion on how to quantify economic damages suffered by an injured party.  In the most recent article, “Business damages measurement: Lost profits or business valuation?” experts discuss two common damages estimation approaches:  1) business valuation and 2) lost profits.  While the approaches are based on some common economic and financial principles, differences in how they are calculated can lead to very different outcomes.  The article also addresses such questions as:

  • Can one apply both methods to the same damages calculation?
  • Can lost profits exceed business value?
  • Is one method more certain, or does it provide a better estimate, than the other?
  • Do certain circumstances indicate that one method must be used?

Read more in Business damages measurement: Lost profits or business valuation?

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