Business valuation services help you determine the economic value of your business or company unit. These services assess the fair value of your business as and when required by the stakeholders. Professional business evaluators help you complete the process in an orderly fashion.
Key highlights of business evaluation are-
- It is an economic value determinant for businesses
- The fare value of a business is calculated
- Market cap, earning multiplier and book value, etc are some of the methods used in business valuation.
Market capitalization Method
It is an easy and convenient method to assess the market value of publicly traded companies. It calculates the worth of the company in terms of the stock market. For example- A company with 10 Million shares with a share value of Rs 100 would accumulate a market value of Rs. 1 billion.
- You can understand this method through the following points-
- It denotes the total market value of all outstanding shares.
- You can calculate the exact value of your company through the formula- No. of outstanding shares * current value of 1 share
- This method helps you further classify the companies as-
Large-cap $10 billion or more
Mid-cap $2 billion to $10 billion
Small-cap $300 million to $2 billion
Time Revenue Method
The Time Revenue Method (also known as the multiples of revenue method) determines the maximum valuation of a company. It uses several current revenues to assess the ‘ceiling’ (maximum value of your business). The current revenue determinants vary from industry to industry.
Major highlights of the Time revenue method are-
- It generates a range of value for your business
- It cannot be termed as the most reliable method of valuation
The method of revenue measurement varies according to the period of consideration of revenue such as
1.revenue or sales (also known as an actual sale) recorded on a financial statement.
2. Forecast of future sales.
Earnings Multiplier method
Earnings Multiplier Method is a price-to-earnings ratio method calculated on price /share or earnings per share model. It follows the financial metric that helps in framing the current stock price of the company in terms of earnings per share of the stock. Investors can use earnings on a relative basis to compare the current and previous stock prices of the company.
Major highlights of the Earnings Multiplier method are-
- It frames the current stock prices on the basis of the per-share earnings of the company.
- It follows the price per share or earning per share method.
- You can determine the difference between the current price of a stock and earning per share of that stock.
Discounted Cash Flow (DCF) Method
Discounted Cash (DCF) Flow method estimates the value of an investment on the basis of its expected future cash flows. This analysis figures out the value of investments on a future projection basis. The resultant outcome derives the decision of the investors according to the valuation of the company.
Major highlights of Discounted Cash Flow (DCF) Method are-
- It determines the value of an investment on the basis of its future cash flows.
- The discount rate of the Discounted Cash Flow method is used to calculate the present value of expected future cash flows
- A Discounted Cash Flow above the current cost yields positive returns on investment
- The future cash flow assumptions may prove inaccurate.
Book Value Method
Book Value of a company is the cost attained after deducting accumulated depreciation from the total cost of the assets of the company. This method helps you in your business valuation by giving you the net asset value on the basis of the total assets after deducting the cost of intangible assets (patents, goodwill) and liabilities. The formula for calculating Book Value per share is-
- Book value of an asset = total cost – accumulated depreciation.
- Book value of a company = assets – total liabilities.
- Book value per share (BVPS) = (shareholders’ equity – preferred stock) / average shares outstanding.
Major highlights of the Book Value method are-
- Book Value is calculated on the basis of the net difference between the total assets and total liabilities of the company.
- It is equal to the cost of an asset on the balance sheet of the company
- The market value of the asset is more than the book value of the company
It is the total net value of the physical assets of the company if it runs out of business and sells all its assets. It calculates the value of the real estate, fixtures, equipment, and inventory of the company after excluding the intangible assets.
These valuation services help in assessing the worth of your business according to your need or requirement. You can use this information to showcase your growth to the prospective investors or to fulfill any other purpose that suits your requirement