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Business Valuation

In the intricate landscape of corporate transactions and strategic decision-making, our firm specializes in delivering comprehensive Business Valuation services. With a deep understanding of valuation methodologies and market dynamics, we assist businesses in determining the accurate worth of their enterprises. From meticulous analysis of financial statements, assets, and market conditions to assessing intangible factors such as brand value and growth potential, our adept team ensures that our clients have a clear and realistic understanding of their business value. By offering expert insights into mergers and acquisitions, fundraising, financial planning, and dispute resolution, we empower businesses to make informed decisions based on a sound understanding of their valuation. Our commitment to staying attuned to industry trends and valuation standards enables us to provide tailored solutions that align with the unique needs of each client. With our Business Valuation expertise, businesses can confidently navigate critical moments, leveraging their valuation knowledge to achieve their strategic objectives while optimizing value.

Special Considerations: Methods of Valuation

Market capitalization is the simplest method of business valuation. It is calculated by multiplying the company's share price by its total number of shares outstanding. For example, as of January 3, 2018, Microsoft Inc. traded at $86.35.2 With a total number of shares outstanding of 7.715 billion, the company could then be valued at $86.35 x 7.715 billion = $666.19 billion. 

Under the times revenue business valuation method, a stream of revenues generated over a certain period of time is applied to a multiplier which depends on the industry and economic environment. For example, a tech company may be valued at 3x revenue, while a service firm may be valued at 0.5x revenue.

WInstead of the times revenue method, the earnings multiplier may be used to get a more accurate picture of the real value of a company, since a company’s profits are a more reliable indicator of its financial success than sales revenue is. The earnings multiplier adjusts future profits against cash flow that could be invested at the current interest rate over the same period of time. In other words, it adjusts the current P/E ratio to account for current interest rates.

The DCF method of business valuation is similar to the earnings multiplier. This method is based on projections of future cash flows, which are adjusted to get the current market value of the company. The main difference between the discounted cash flow method and the profit multiplier method is that it takes inflation into consideration to calculate the present value.

This is the value of shareholders equity of a business as shown on the balance sheet statement. The book value is derived by subtracting the total liabilities of a company from its total assets.

Liquidation value is the net cash that a business will receive if its assets were liquidated and liabilities were paid off today.

This is by no means an exhaustive list of the business valuation methods in use today. Other methods include replacement value, breakup value, asset-based valuation and still many more.