An earnings-based valuation methodology (capitalisation of earnings or discounted cash flow) remains the preferred approach for valuing shares in a going concern proprietary company, even where the company's balance sheet shows substantially higher equity. The absence of stable earnings or long-term management forecasts does not preclude the use of earnings-based methods where the valuer has sufficiently reliable material. Book value of assets, including trailing commissions recognised at net present value, is not a reliable proxy for market value where operating costs of earning those commissions are not reflected in the balance sheet figure. Section 1305 of the Corporations Act, which makes accounts prima facie evidence, does not displace the need for proper valuation methodology.
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