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7 Business Valuation Methods You Should Know

In general, business valuation is a procedure of estimating the economic value or the net worth of an entire business or an organization. To estimate the fair value of a business for a variety of reasons such as the sale value, taxation, partner ownership establishment, and understanding the economic potential of the company, business valuation can be utilized.

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7 Business Valuation Methods You Should Know

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  1. 7 Business Valuation Methods You Should Know In general, business valuation is a procedure of estimating the economic value or the net worth of an entire business or an organization. To estimate the fair value of a business for a variety of reasons such as the sale value, taxation, partner ownership establishment, and understanding the economic potential of the company, business valuation can be utilized. 1.Market Value: a Most influenced approach for estimating the value of the business based on the share price by comparing it to similar businesses that have been sold. This works for businesses having access to sufficient market data on their competitors. 2.Asset-Based Valuation: This focuses on the net asset value of the company, not the recorded balance of the assets and liabilities, as per the balance sheet. Two main types of approaches these types of valuation are: going concern and liquidation value. Going concern accounts for the company’s present equity whereas the liquidation value method operates during urgency when all the assets are sold off. 3.ROI-Based Valuation: Return on investment is a popular unit because of its versatility and simplicity. With this, the efficiency of

  2. an investment can be evaluated and calculated for the amount of return on a particular investment, relative to the investment’s cost. 4.Discounted Cash Flow (DCF): Used to estimate the investment value on the basis of its future cash flow which likely is estimation that investors will receive in the future. 5.Capitalization of Earnings: This helps estimate the business value by looking at the current cash flow, the annual return rate, and expected business value. This demonstrates the business growth over the time period. 6.Multiples of Earnings: This formula calculates the maximum value of a business by assigning its present income to a multiplier. Depending on the sector's financial climate, and other variables, multipliers differ. 7.Book Value: This is the value of a company's shareholders' equity as declared in the balance sheet. With this formula, value of the company’s equity can be calculated according to the balance sheet of the company. Original Source: https://bit.ly/31n3Kzt

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