What are some common business valuation methods?


Quick Answer

Discounted cash flow, market valuation, comparable transaction and the multiples method are the most common methods for the company valuation. An option pricing valuation is a lesser known approach to business valuation.

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Full Answer

There are two ways to value a company using the discounted cash flow approach: the adjusted present value and the weighted average cost of capital. Both ways require calculation of the free cash flow of a company and its net present value.

Comparable transaction method calculates the valuation according to transactions in the same industry that are similar in a key valuation parameter. The multiples method employs multiples of price earnings ratio or other suitable indicators to ascertain the value of a company.

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