by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles
Common Characteristic-Based Ratios or MultiplesThe following subsections contain a non-exclusive list of characteristic-based ratios used to value a business. These ratios are derived from a comparable transaction, firm, or industry. Sometimes, multiple ratios are...
by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles
Issues Associated with Market-Based Valuation MethodsAs will all valuation methods, market-based valuation methods have negative aspects – particularly when they are used to value startup ventures. Some of the notable issues with market-based approaches are...
by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles
What are Income-Based Valuation Methods? Income based approaches value a business based upon the past, current, or expected future cash flows of the business and the risk that the business will not produce the desired return. Estimating and valuing flows of income is...
by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles
What is the Earnings Capitalization Model?The earnings capitalization model values the company based upon the company earnings. To determine normalized earnings, you calculate a weighted average of earnings over a period of years. The earnings reported on financial...
by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles
What is the Build-Up Method of Valuation?In the “buildup method” valuation begins with the risk-free rate. The individual valuing the firm then makes the subjective determination of what percentage to add to the risk-free rate. The amount added depends...
by TheBusinessProfessor | Feb 23, 2025 | Business Finance, Personal Finance, and Valuation Principles
What are the primary business valuation methods?Valuation methods are particularly important in startup ventures, as valuation affects the interest of potential investors and reflects the expectations of the firms future performance. Equity investors in startup...
