Methods of valuation

01:15 Mins Read

There are many methods of valuation that you can choose from. This video talks about some of the most popular ones.

Transcript

Methods of valuation Let’s take a look at three of the most popular valuation methods. First, we have the market value approach. Here, the value of a company is determined by comparing it to similar businesses that have recently been sold off. Next, we have the asset-based approach. There are two ways to go about this – The going concern asset-based approach and the liquidation asset-based approach. In the going concern approach, the book value of a company is calculated as the total assets minus the total liabilities. In the liquidation approach, the liquidation value is the net cash that would be received if all the assets of the company were sold and liabilities paid off. Lastly, we have the Discounted Cash Flow method. Simply put, this method aims to estimate how much the projected future cash flows of a company Are worth today. To know the nuances of the DCF method, Proceed to the next chapter in Smart Money.

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