It has become necessary to define
the economic value of the business or a company. Business evaluation is helpful
as during business valuation, fair value is determined including sale value,
partner ownership & divorce proceedings. A professional business valuator
performs the process of business valuation for owners. In the market, various methods are available for business valuation such as review of
financial statements, discounting cash flow models and much more.
Three approaches are used to
determine the value of a business: Income Approach, Asset Approach &
Market-based approach.
Asset Approach: The business is viewed in the form of assets and
liabilities that constructs the business value. One needs to find out which
assets and liabilities to include in the valuation, choose a standard of
measuring their value, and determine what each asset and liability is worth. By
determining the value of assets and
liabilities, the business value can be figured out.
Market Approach: It is based on the business worth in the real
market place. The business price is evaluated through selling and buying price
of similar competitive business in the market place.
Income
Approach: It is based on the expected economic benefits of the business and
risk factors. It uses two ways:
·
Capitalization
·
Discounting
Our
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