What are the Common Methods of Business Valuation?
There are several methods to value a business, each with its own merits and drawbacks. The most commonly used methods include:
Market Capitalization: This is the simplest method and is calculated by multiplying the company's share price by its total number of outstanding shares. Earnings Multiplier: This method adjusts future profits against cash flow that's invested at the current interest rate over the same period. Discounted Cash Flow (DCF): This approach estimates the value of an investment based on its expected future cash flows, which are adjusted (discounted) to present value. Book Value: This method is based on the value of the company's balance sheet, excluding any intangible assets. Market Comparables: This involves comparing the company with similar businesses in the industry that have been recently sold or are publicly traded.