Session 2: Assessing Business Quality (1 of 2)

1. Why Assess Business Quality?

 Recall from Session 1: The intrinsic value of a business has two components:

o Assets in Place (AIP) → Cash flows from existing operations.

o Present Value of Growth Opportunities (PVGO) → Cash flows from future growth.

 For businesses where PVGO dominates (fast-growing, asset-light companies), business quality is
crucial.

 If growth is pursued without quality, value can be destroyed.