Business valuation has a lot of advantages to any company. It allows owners to determine the exact value of the company. It also provides detailed assessment on all the company assets. It is also a great data to attract potential investors and satisfy current investors. With so much benefits on business valuation, a lot of companies especially large companies are using business valuation.
When it comes to business valuation, there are a lot of ways to do it. Each of the methods does not have the same accuracy as the other methods. However, each method is useful in business valuation. And here are the common methods which business valuation is done.
1.Asset-based approach - Asset-based method is a way of getting the business valuation through the company assets. Every asset in the company is listed and evaluated. After accounting all the assets of the company, the business valuation report is then determined through the assessment of the company assets.
2.Income approach -
mainly relies on the earnings of the company. All the past earnings of the company from when it started are accounted and evaluated. These data will provide a great basis for the business valuation of the company. It is important that the company has been operating for at least several years in order to provide sufficient data for this approach to obtain accurate valuation.
3.Market approach - Market approach is evaluating the value of the company depending on how it fairs on the market. If the company stocks are high in the market, the company will get a higher business valuation. Meanwhile, cheaper stocks means lower business valuation.
4.Relative approach - Relative approach is not as accurate as the first three methods. The main reason is it does not evaluate the company itself. Instead, it looks for a similar company in the market and use the business valuation data of that similar company as a basis for measuring the value of the company. To learn more about business valuation, visit
5.Earning projection approach - Earning projection approach is a business valuation method in which the potential earning of the company in the near future would determine the current value of the company. This is a great method for those who would like to impress current and potential investors.
Large companies would prefer to use all of these methods in order to get a more accurate business valuation reading. The results are compared which can minimize the derivation of data. On the other hand, small companies should simply choose a method of business valuation that suits their situation as any of these methods can still yield an acceptable report,
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