How do you value a business?

Common approaches to business valuation include a review of financial statements, discounting cash flow models and similar company comparisons. Valuation is also important for tax reporting. The Internal Revenue Service (IRS) requires that a business is valued based on its fair market value.

Which business valuation methods provide insight into a company's financial standing?

Here’s a look at six business valuation methods that provide insight into a company’s financial standing, including book value, discounted cash flow analysis, market capitalization, enterprise value, earnings, and the present value of a growing perpetuity formula. 1. Book Value

What is a company valuation?

During the valuation process, all areas of a business are analyzed to determine its worth and the worth of its departments or units. A company valuation can be used to determine the fair value of a business for a variety of reasons, including sale value, establishing partner ownership, taxation, and even divorce proceedings.