Q:

What are some common business valuation methods?

A:

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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