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To take optimal business decisions, you should conduct business valuation. It is done for various reasons such as during mergers and acquisitions, investment analyses, capital budgeting, financial reporting, litigation, for loan guarantees and in taxable events to determine tax liabilities.
Certain issues like how the business is perceived in the available market, the dynamics of the sector where it operates, the unique characteristics of the company and how it fares with its competitors are being assessed.
• Asset-based approach – The overall value of the business is evaluated using the entire investment, especially during company liquidation. But some values recorded in the accounting books may not bear any relation to the current market value. Therefore, the adjusted net asset value is taken into account.
• Market-based approach – This evaluates the cost of the business by using an average sales figure recently used in the market. This strategy is used if there are sufficient comparable organisations to look at.
• Income-based approach – This uses the idea that the company’s actual value depends on its future wealth and development. In discounted cash flow, the owner or the company estimates the future returns of the business and evaluates the risks associated with it.
The market values of properties keep changing. Seek the help of professionals to give you comprehensive data.
• Business valuation is usually done during mergers
• There are three approaches to get right valuation
• Seek the help of professional valuation company
Now that you know your business worth, learn the Significance of Market Research.
Source: Asha Das, Special to Classifieds
The writer is a freelancer