Every business should follow a steady growth pattern. The growth of the business will help it to expand in more markets and will also provide greater avenues and scope for development. To understand the complete scope of growth, the management should first evaluate the company so that it can prepare a plan which will assist the company.
What is Business Valuation?
Business Valuation can be defined as a process that helps in determining the value of the company or business. Business Valuation is a very important step in making a plan for growth in the future. A Business Valuation can also help during the time of Mergers and Acquisitions or during the liquidation of the business.
Methods to Determine the Value of a Business
There are various methods by which one can determine the value of the business; these are:
1.Income Approach
The income approach to decide the value of a company is very common. In this method, the value of a business is understood by the total income generated by the company at a specified time.
2.Market Approach
The market approach of determining the value of a business is based upon the present market value of all the company according to the shares or the cost of a similar business.
3.Asset Approach
According to the Asset Approach, the value of the business is determined by the current market price of all the assets and inventories owned by the company. It is to be noted that the asset approach of valuation will also include all the liabilities and the outstanding liabilities of the company.
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