What are the Advantages of the Income Based Approach?
The income based approach offers several advantages:
Focus on Earnings: It emphasizes the importance of the business's ability to generate future income, which is a critical factor for investors. Adjustable Assumptions: The approach allows for the adjustment of assumptions such as growth rates, discount rates, and future cash flows to better reflect the business's unique circumstances. Comprehensive Valuation: It provides a comprehensive valuation by considering the long-term earning potential of the business.