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Browsing by Author "Latsabidze, Natela"

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Enterprise (business) evaluation methods and features of application in practice
(Ivane Javakhishvili Tbilisi State University Press, 2019) Latsabidze, Natela; Tsartsidze, Murman; Khmaladze, Giorgi; Khmaladze, Nikoloz
Business valuation is a complicated, expensive and time-consuming process. According to the norms of procedures and professional standards approved in the international practice, the definitely established approach or recommendation on applying the specific method of valuation does not exist. The method of valuation should be selected taking into consideration the specific objective of business valuation. It is worth noting, that the evaluator is free to approach and select the valuation method, he/she can apply the various methods considering the aim of valuation and the specific situation. The process of selection should necessarily comprise there view of appropriate basis for the value and preconditions of valuation, the analysis of the strength and limitations of possible approaches and methods of valuation, the availability of the required, credible information for applying the specific method. According to the international standards of valuation three basic approaches of valuation – market, income and expenditure - are deemed to be admissible. All the methods of market approach to business valuation is based on the principle of competitiveness. On the one hand, the buyer does not pay for a certain business more than the value of other investment containing the analogous risk, on the other hand, the seller does not agree on the value of the analogous enterprise (business) on the market. In the case of applying this approach of valuation, the credibility and quality of the information necessary for valuation assume great im-portance. If the evaluator obtains the data of several analogous sales, the data to be compared will be representative and the quality and credibility of valuation will increase. The obtained information about sales should be qualitatively similar. It is logical, that the reliable basis for comparison is the data of enterprise (business) of the same type, having the same organization-al-legal form of ownership and approximately the same scale. The approach focused on the income valuation of an enterprise is based on determining the current cost of flow of income considering the risks of receiving the income. While con-ducting the valuation the attention should be focused on the following circumstances: if the predictable cash flow is expressed by real indicators, the evaluator should use such a discount rate which does not factor in the future changes of prices caused by the inflation or deflation. While applying the income approach, the valuation may necessitate corrections so as to reflect the issues which were not envisaged in the cash flow forecast or discount rates. The salient point is that a lot of enterprises can be valuated according to the same scenario of cash flow, but the evaluator can use several scenarios or imitative models as well. I think, the methods of determining the discount rate to be employed in the evaluative practice of Georgia are those acknowledged at the international level, they are as follows: capital asset pricing model (CAPM), the method of weighted average cost of capital (WACC), the empirical (evidence) rates/profitability, the internal rate of return(IRR), the weighted average return of assets (WARA), the cumulative model. The expenditure approach, which is rarely used in the international practice of enterprise (business) valuation, is based on the replacement principle –the rational investor will not pay for the business assets more than for the assets having the analogous economic benefits. Within the framework of the mentioned approach the basis for the calculation of an enterprise value is the data of financial statements. However, it is worth noting that the book value rarely coincides with the market value. While applying the expenditure approach it is important for the evaluator to establish the value through making corrections to the functional, economic and physical depreciation of assets. All the approaches of enterprise (business) valuation (market, income and expenditure) have the strong and weak sides. Among the strong points of market approach the following should be highlighted: √ While determining the cost the direct market benchmarks are used, the minimum corrections are made and the market “opinion” on the enterprise value is at most expressed √ The method allows to conduct the quick preliminary “express-valuation” of the business/enterprise value. √ The approach may also be applied to justify the value set within the framework of other approaches The drawback of the mentioned approach is that it requires selecting the adequate analogous objects for comparison as well as collecting the enormous amount of information that sometimes is extremely difficult to fulfill. The employment of expenditure approach depends on the current state of the market and its effective performance. That is why, a part of specialists considers this approach to be not so accurate and the results of valuation to be less credible. The essential point in enterprise/business valuation approach focused on the income is to determine the current value of income flows. While applying the income approach it is important to establish the capitalization and discount rate. The anticipated growth in the process of using a discount may be evidently factored in the forecasted incomes, and applying the capitalization methods the expected growth, as a rule, is reflected in the capitalization rate. Analogous to other methods, the valuation approach based on the enterprise (business) incomes has its strong and weak sides. It is considered to be positive sides that the aforesaid approach: √ considers the possibility to earn income by the object of evaluation and the risks related to receiving income √ allows to reflect objectively not only the current situation of the object of valuation but the prospects of its performance and development as well. √ allows to determine the adequate benchmark of the business value which is based not so much on tangible assets as on new technologies, intellectual property, etc. √ can at most express the investors motivation, that is why, it is most acceptable, for ex-ample, to determine the investment value As regards the drawbacks we deem it necessary to point out that the approach based on incomes should be applied for that enterprise (business) valuation, which, as a rule, can be operable and definable in the future. It is based on the long-term forecast of the future monetary return whose credibility greatly depends on the stable performance of the enterprise as well as the economic security of the country. Its employment is also related to a certain biased approach to establishing the rate of cash income to be earned in the future and the capitalization/discount rate, it requires the detailed analysis of enormous amount of economic and statis-tic data. The expenditure approach to enterprise valuation, as it was mentioned, is comparatively rarely applied. The employment of the mentioned method is recommended, when: the enterprise is at the initial stage of development, or it is newly established and the credible determination of the cash flow and its comparison to other market subjects is impossible; the business entity represents the investment or holding company and it is possible to apply the summation method; the business entity is not an operable enterprise or at the time of liquidation the value of its assets may exceed the cost of the business entity as of an operable enterprise. Regarding the expenditure approach it should be pointed out that it has the certain strong sides implying the following: √ it adequately reflects the assets of an enterprise, and the business value, in its turn, is determined by the existence of assets and cost; √ it may be applied in case the initial information necessary for other valuation methods is not available; √ the employment of the approach is possible under the conditions of liquidation of an enterprise, when the realization of assets are considered to be made piecemeal √ it is clear and easy to explain to consumers To be objective, the drawbacks should be highlighted as well. The enterprise (business) valuation based on the expenditure approach cannot completely reveal the prospects of business development and requires the substantiation of the existence of intangible assets, profit, goodwill of the objects of intellectual property and their separate valuation. Its employment in practice requires quite hard and tedious jobs. In the process of enterprise/business valuation it is necessary to evaluate the risk-factors related to functioning of an enterprise. The risks are linked to the macroeconomic as well as microeconomic (domestic manufacturing) factors. The factors conditioning the macroeconomic risks – the level of inflation, the social and economic situation of the country, the level and stages of development, the changes in the interest rate and currency exchange rate, political instability –assume particularly great significance for business valuation in Georgia. While conducting the business valuation the attention should be focused on financial risks – the low level of financial resource management, the lack of qualified specialists in the sphere of financial management, the failure to draw up the estimate documentation correctly, spending the unreasonable additional expenses, etc. It is of equal importance to consider the marketing risks- the change of consumer behavior, strengthening the competitiveness, the loss of positions on the market, the untimely market penetration, etc. While conducting the business valuation it should also be taken into account that maybe rarely, but the enterprise may still face the risk of default, which is related to its bankruptcy or temporary insolvency.
Labor market and peculiarities of informal employment in the context of the global pandemic
(European University, 2021) Tsartsidze, Murman; Latsabidze, Natela
In terms of overcoming the socio-economic problems in Georgia, great importance is attached to efficient functioning of the labour market. It must ensure a radical change the sphere of social-labour relations, accordingly, efficient overcoming the chronic unemployment in the country and efficient employment of labour force. The results of the research confirms, that adequate labour market of normal market environment is still on the formation stage with serious problems and challenges which is developed in Georgia. In 1990s at the initial stage of formation the national labour market difficult economic situation which was in the country, give a push negative developments in the field of labour relations, among which before nowadays invincible challenge is the growing trend of informal employment. It can be said, that this one took on a large-scale character in the current period of financial and economic crisis caused by the global pandemic. In fact, the informal sector in Georgia has become an independent segment of the labour market, which has a significant impact on employment of the population, standard of living and on the overall process of economic development. Informal employment, as an important study socio-economic event and phenomenon, assess its level and scale, it can be said convincingly that it will not lose its relevance for many years. Negative consequences of informal employment, needs analysis and evaluation factors affecting the influx of economically active population into the informal sector of the labour market. Also its important discuss and evaluate the positive aspects of informal employment in the short term, which manifested in facilitation reasons socio-economic and psychological consequences of unemployment. In the work researched certain aspects of informal employment, analyzed its forms, faces, identified peculiarities of informal employment and rated its scale against the background of the global pandemic. Substantiated, that informal segment of the labour market requires depth research and evaluation. By the research identified the main factors for the growth and development of employment in the informal sector of economy in the Georgian labour market, from which we must distinguish: high levels and scale of poverty in the country, chronic unemployment and inefficient employment; insecurity social principle of justice in the field of employment; equal employment opportunities for job seekers; lack of proper conditions for equal realization of labour rights; population low availability on different types of labour market services and events, inadequate rates of economic development; reduced demand for labour, accordingly limited employment opportunities and prospects; low level and quality of development of vocational education system, which not fully focused on labour market demands, social protection of the unemployed, none of insurance mechanism; difficulties in training and retraining the unemployed; low level of remuneration; low level of stimulation, motivation and labour organization, underdevelopment of labour market infrastructure and its management information system, problems in the field of management and regulation of social-labour relations, which connected to the development of the legislative-normative base, lack of a complete mechanism for controlling the working conditions of employees and etc. The main results of the research are summarized in the concluding part of the work.
Labour market and trends labour demand changes in Georgia in the conditions of the modern global crisis
(Ivane Javakhishvili Tbilisi State University Press, 2023) Tsartsidze, Murman; Latsabidze, Natela
At the current stage of socio-economic development of the country, overcoming unemployment, poverty and providing effective employment in Georgia remains the main task of macroeconomic policy. Despite the recent reforms and some positive changes in the direction of economic development, there are still a number of difficulties in the field of employment, which firstly are connected to the shortage of jobs across the country, and on the other hand, the shortage of highly qualified workforce is a very acute problem. At the same time, there is a noticeable lack of personnel with the necessary knowledge, skills and experience according to certain professions and specialties. This confirms the existence of a certain disbalance between the demand and supply of labour force in the labour market of Georgia. The problem is further exposed and aggravated by modern global trends related to current demographic, organizational, structural changes, large-scale labour emigration, use of new non-standard forms of employment, development of technologies and innovations. According to the mentioned situation, the systematic study of the labour market is of great importance especially in the direction of studying the actual demand for labour force, that the system of higher and professional education in the country to be properly focused on the training of personnel with relevant professions and qualifications, which will fully meet the requirements of employers for the workforce and finally eliminate the existing imbalance in the labour market. In the paper is presented an analysis of current condition of Georgian labour market, accordingly, the main problems and challenges in this field are highlighted. Special attention is paid to the depth research of trends in labour demand in the labour market of Georgia in recent years.
Peculiarities of labor migration in the current global crisis in Georgia
(Ivane Javakhishvili Tbilisi State University Press, 2021) Tsartsidze, Murman; Latsabidze, Natela
In the context of the global pandemic crisis, when it became difficult to ensure the stable economic development of the country and the improvement of the living standards of the population, specifically, the research of problems related to labour emigration acquired more urgency in migration processes. Labour emigration is a socio-economic phenomenon of a global nature and it become a significant challenge for Georgia during several decades. In scientific publications on migration, it is always emphasized that high levels and scale of labour emigration in addition to the negative consequences it also has some positive impact on the country's economy, which firstly reflected in the income and living standards of the population on the depth and scale of poverty. In the paper is analysed the peculiarities of labour emigration in Georgia, causes and factors affecting the current global pandemic. The research identifies those key factors, which at the current stage, are stimulating the growth of labour emigration. Evaluated for this event positive and negative sides. Based on the results of the research, the paper concludes the main conclusions and recommendations, whose implementation in the near future will contribute to the effective regulation of migration processes, improving the quality of working life and ultimately raising the living standards of the population.
Problems of effective employment and its impact on labor migration in Georgia
(Ivane Javakhishvili Tbilisi State University Press, 2019) Tsartsidze, Murman; Latsabidze, Natela
For the purpose of achieving the economic advancement of the country as well as the improvement of welfare and living standards of the population, the provision of their effective employment assumes the considerable importance. The latter ranks among the socio-economic problems of global nature and constitutes a significant challenge to the country. The above-mentioned is also conditioned by the fact that in Georgia, at the current stage of forming and functioning the labor market the unemployment is acknowledged as the key factor accounting for the poverty, which seriously hinders the development of the country and its socio-economic progress. Along with the other negative points the chronic unemployment and inefficient employment are the crucial factors effecting the labor migration. They greatly stimulate the labor migration and contribute to the considerable growth in its incidence. Accordingly, based on the actual circumstances existing at the labor market the utmost importance should be attached to overcoming the chronic unemployment, the effective employment of the population and the regulation of problems of labor migration. Depending on the above –mentioned the paper presents the detailed analysis of the existing situation as well as the ongoing field and structural changes in the sector of employment. The research has resulted in highlighting the key factors, which impede the effective employment of working population in the country and encourage the increase in the incidence of labor emigration. On the basis of findings of the research, the paper formulates the major conclusions and recommendations whose realization will ensure the development of labor market, the increase in the scale and level of employment of population in the country, the effective regulation of the migration processes, the improvement of the quality of work life and finally, the rise of living standards of the population in the near future.
Structural and sectoral features of the labor market and employment in the Georgia
(All-Russian Research Institute of Labor, 2020) Tsartsidze, Murman; Latsabidze, Natela
The object of the study is the employment policy in the current labor market amid national and global political and socio-economic requirements. The aim of the study is to develop recommendations for effective employment, considering the situation in the area based on a detailed analysis and a critical assessment of regional, sectoral and structural changes. The work employed the economic-mathematical method and the methods of synthesis and statistical analysis. The authors studied and evaluated scientific literature, regulatory documents, and online resources based on critical analysis. As a result, they identified the main sectors of the national economy with the expected high economic activity and justified the opportunities and prospects for employment growth. The paper provides recommendations, whose practical use will contribute to full employment growth and real implementation of active policy on the labor market, which is the most important condition for raising living standards. The study results - the provisions and recommendations - are supported by theoretical studies and appropriate practical calculations. Therefore, they could be further applied by the Department of Labor and Employment Policy of the Ministry of Labor, Health and Social Affairs of Georgia, relevant structures of the Ministry of Economy and Sustainable Development of Georgia, the recently created State Employment Promotion Agency of Georgia, whose most important function is to implement active policy in the labor market and to provide employment. The recommendations may also be of use to specialists working on a human resources development strategy, students and researchers.
Unemployment Insurance System in Developed Countries
(Ivane Javakhishvili Tbilisi State University Press, 2021) Tsartsidze, Murman; Latsabidze, Natela; Gabadadze, Shota
Analyzed in the work peculiarities of functioning the unemployment insurance system in eco-nomically developed countries. In this field has been studied the international practice of ad-ministration, rated the amount of allowance issued under the unemployment insurance mechanism, appointment prerequisites, period of issuance and duration, sources of funding formation, legislative bases of regulation. The focus is about, context of the global financial and economic crisis caused by the pandemic, about changes in the unemployment insurance mechanism, in a separate country. Substantiated the necessity of forming an unemployment insurance system in Georgia and expediency of sharing best practices tested abroad – considering of the country socio-economic development and the peculiarities of the functioning labour market. In developed countries, the state is actively implementing targeted macroeconomic policy for social protection of the population, to regulate unemployment and social-labour relations in general, within which it stands out as a general macroeconomic, also specifically perfection measures of labour market. However, for problems of unemployment and regulatory purposes the state pursues a passive and/or active employment policy through relevant institutions and instruments of the labour market. The goal of active policy is planning and realization of un-employed stable and effective employment support measures, improving the efficiency of the functioning of labour market. Passive policy is aimed to maintain the welfare of the unemployed, to reduction a minimum results negative social of unemployment, economic and psychological for citizens left without a job. That's why the main instruments of passive policy is unemployment insurance and ensuring early retirement. Accordingly, in developed countries for the effective realization of this policy created public employment services and flexible and improved unemployment insurance systems, which are somewhat different in terms of individual countries. The differences are conditioned with the current situation in the labour market and managing of social-labour relations. Management and administration of unemployment insurance system is carried out within labour market and passive policy (PLMP). Amount to be paid under the unemployment insurance program, appointment rule, term of issue and other conditions are strictly defined by the relevant legislation of an individual country. In particular, in many countries, its duration is mainly related to a reasonable time to find a job, duration of frictional unemployment, with a period of unemployment training. In order to maintain employment motivation, amount issued within the framework of unemployment insurance is less than the average salary received by a person during the period of work and it is differentiated at a certain percentage level. Unemployment benefits can be issued from the state budget, or from special targeted funds. This formed from various taxes, which are often paid by both employees and employers. Proven systems in European countries show, that unemployment insurance for a citizen being unemployed and consequently, in the absence period of remuneration (salary), is an effective mechanism for its financial needs, which significantly compensates for unearned income in the form of salary. By the authors, according to the experience of many countries, start working on the introduction of the unemployment insurance system in Georgia is considered an urgently needed case. Based on the practical analysis experience of different countries, substantiated that it is essential in the insurance system, that the amount of allowance to be paid during the period of un-employment should be related to the average wage and the volume of insurance premiums, but the issuance period - deadline for finding a new job, the duration of the transition from one job to another and time required for retraining of an unemployed person. It is emphasized that, for the existence of a full-fledged legal basis for the unemployment insurance system ratification of convention N102 ,,Minimum Norms of Social Security" (approved by ILO in Geneva on 04 June 1952) [C102, 1952 (No. 102). (ilo.org)] International Labour Organization is advisable.

Browsing by Author "Latsabidze, Natela"

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