Pre-valuation preparation

01:07 Mins Read

Before you get to the actual exercise of valuation, there are some things that you need to take care of. Find out more in this video.

Transcript

Pre-valuation preparation What should you do before you get started with valuing a company? Come, let’s find out. Firstly, you need to choose the right method of valuation. Depending on the nature of the company, some methods may work better than others. For example, if a company pays dividends, the dividend discount model may be a good option. For a company that doesn’t pay dividends, the Discounted Cash Flow Method may be more ideal. Secondly, gather all the relevant data points. Some valuation methods may require quantitative data, While others may need qualitative information. And finally, once you’ve done this, revisit the assumptions you need to make. Ensure that your assumptions are not overtly optimistic. With this pre-valuation preparation done, You can begin to build your valuation model. Want to know more about this? Then head to the next chapter in Smart Money.