This document discusses various methods for business valuation. It describes market value, asset value, and income-based valuation methods. The market value method analyzes past transactions of similar businesses but is subjective. Asset value methods value a business based on its net assets or liquidation value. Income-based methods capitalize past or project future earnings to determine value. The document stresses that the chosen valuation method should serve the business's best interests and be based on tangible records, not assumptions, to avoid financial issues from inaccurate valuations.

1. Widely Adopted Methods
for BUSINESS VALUATION

2. Calculation of monetary
worth of the business is
one of the major strategy
for growth of a company.

3. Business valuation is a
general process for
determining the economic
worth of a business.

4. Financial transactions
A business valuation can be
utilized for different things
such as:
Tax reporting
Financial reporting
Litigation
Transfer of ownership
Mergers & acquisitions

5. Types of business valuation methods

6. There are various methods that are
used for the purpose of business
valuation depending on the specific
nature of the company.
Some of the widely recognized methods for
a business valuation are listed below:
Market value based valuation method
Asset value based valuation method
Income-based valuation method

7. Market value
based valuation
method

8. The market value based
valuation methods analyze
the past transactions and
market performance of similar
businesses.
It is one of the most
subjective processes for
measuring business value.

9. A market value business
valuation method is a good
approach to gain an
understanding of the total
worth of a company.
But, a business cannot
completely depend on this
method and must consider
using other types of
business valuation methods.

10. Asset value
based valuation
method

11. This valuation method is
based on the business's total
net asset value of the
company as per the balance
sheet.
The liabilities of the
business are not taken into
consideration while
evaluating the business
from its assets.

12. The asset based valuation of business can be performed in
two ways:
In this method, the
net value of the
business is calculated
by subtracting all the
liabilities from the net
business assets on the
balance sheet.
Going concern
asset based method
In this method, it is
assumed that the
business is planning
to close and all of its
assets are open for
liquidation & all of
its liabilities are
cleared.
Liquidation asset
based method

13. Income-based
valuation
method

14. When a company is
adopting the income-based
valuation method, then it
must have established
operations with a constant
revenue generation.
Under this method, the
valuation of the business
can be done by the
following processes.

15. In Capitalizing past
earnings, the value
of the business is
calculated from the
potential ROI (return
on investment) or
the income from the
business.
Capitalizing past
earnings
In discounted future
earnings, the valuation
of the business is
determined by taking
account of the
predicted future cash
flow.
Discounted future
earnings

16. Bottom line

17. When a company is
adopting a certain
valuation process, then it
must be in the best
interest for the business.

18. All assumptions must be
based on tangible factors
and genuine records. The
valuation should not be
determined by forming
anticipated factors.

19. The company should
carefully implement the
best method as a small
blunder can lead to
significant financial crisis.

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