Business Valuation

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What It Means

Business Valuation refers to the method used to establish the market value of a business. There are several methods to value a privately held business, including:

  • Multiple - Subjective Multiplier factors applied to objective values from a company’s financial statements, such as revenue or EBITDA

  • Market Comparable - Valuations applied to similar companies in the recent past

  • Discounted Cash Flow - Discounted Cash Flow represents the current value of a series of future expected payments

  • Book Value - Value of shareholder’s equity as shown on the company’s balance sheet

Why It’s Important

There are several methods for valuing a business because they each have their own merits depending on the circumstances. Valuing a business is a complicated process. A best practice approach is to compare and consider the results of several valuation methods.

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