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Business Valuation: Estimate Worth Of Your Business

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By Author: Alex Dixon
Total Articles: 2
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There are some occasions when business owners want to know or estimate the worth of their business. It is very imperative to assess business valuation to get to know that whether you have significant asset or liability. Mostly, true valuation of business occurs only when business owners sell the business. However, there are four basic methods of business valuation such as Asset Based valuation, Earnings Based, Market based, and Cash-Flow based. There is a common step which comes under all the methods, compilation of relevant and accurate financial information of the company.

In simple language, business valuation is a set of simple steps used to determine the value of the business or market value of the organization.

Asset approach – This approach is used to determine the liquidation worth of an operating business. It is a very effective approach to estimate the replacement value or liquidation value of the business.

Market based approach - In this approach, valuation of your business will depend on the analysis of different similar business to get estimate value or company valuation.

Earning Based ...
... Approach - It is closely integrated with the market approach. There is a categorized formula to determine the earning based company valuation.

Valuation = Average of normal EBT/capitalization rate

Cash Flow Based valuation – This approach is just similar to the earning based approach. It estimates the value of business depending on the future coming cash into the business.

All these methods can be applied to estimate company valuation in the market. Sometimes, reasons of estimating valuations might be just to sell off the company. Whatsoever the reasons are, you just need to consider the factors that influence company valuation process and methods precisely. Here are some factors that can affect the process of valuation.

* Company’s overall performance and condition
* Reason for selling or estimating the value
* Competition – moderate, limited and severe
* Legal rules and regulations
* Selection of method and procedures
* Business assets

Business valuation is a combination of art and science, which focus on the current value or worth of the business after analyzing other related factors. It is a complete educated guess to provide worth of the company or business to the owners for several purposes whether for selling or only determining the asset and liability. There are several websites who offer services of expert and experienced person to judge and evaluate the value of companies and business in the market.

Business valuation is a highly developed process and a set of procedures used to estimate the economic value of a of an owner’s interest in a business. For more details about company valuation please visit our website www.expertvaluations.com.au

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