Business Valuation

What is 'Business Valuation'

The process of determining the economic value of a business or company. Business valuation can be used to determine the fair value of a business for a variety of reasons, including sale value, establishing partner ownership and divorce proceedings. Often times, owners will turn to professional business valuators for an objective estimate of the business value.

BREAKING DOWN 'Business Valuation'

The field of business valuation encompasses a wide array of fields and methods. The tools and methods can vary between valuators, businesses and industries. Common approaches to business valuation include review of financial statements, discounting cash flow models, and similar company comparisons.

RELATED TERMS
  1. Relative Valuation Model

    A business valuation method that compares a firm's value to that ...
  2. Market Approach

    A method of determining the appraisal value of an asset based ...
  3. Valuation Analysis

    A form of fundamental analysis that looks to compare the valuation ...
  4. Times Revenue Method

    A valuation method used to determine the maximum value of a company. ...
  5. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  6. Chartered Business Valuator - CBV

    A designation offered by the Canadian Institute of Chartered ...
Related Articles
  1. Investing

    How To Choose The Best Stock Valuation Method

    There is no single valuation tactic that works in every situation. But a company’s characteristics provide clues to investors about the best method to use.
  2. Investing

    Top Reasons IPO Valuations Miss The Mark (MS, ZNGA)

    The costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.
  3. Investing

    Discounted Cash Flow (DCF)

    Discover how investors can use this valuation method to determine the intrinsic value of a stock.
  4. Investing

    Value Investing: Why Investors Care About Free Cash Flow Over EBITDA

    Examine value investing philosophy and methodology to see why free cash flow is more important than EBITDA in pure intrinsic value calculation.
  5. Entrepreneurship & Small Business

    5 Reasons Small Business Owners Sell Their Companies

    Selling a business you've built from scratch isn't done lightly. Consider these moments when the opportunity might be right for you.
  6. Trading

    How to Identify Mispriced Stocks

    Find out how to identify mispriced stocks. Learn about intrinsic and relative valuation methods based on fundamentals, and technical analysis.
  7. Managing Wealth

    The 4 Most Common Reasons a Small Business Fails

    Discover the most common reasons small businesses fail, including capital formation, management concerns, planning issues and marketing missteps.
  8. Retirement

    Ready to Retire? Here's How to Sell and Close Your Small Business

    Learn the essential steps to prepare to sell your business with the best possible outcome, a secure retirement for you and your family.
  9. Investing

    Equity Valuation: The Comparables Approach

    The premise for the comparables approach to equity valuation is that an equity’s value should bear some resemblance to other equities in a similar class.
  10. Entrepreneurship & Small Business

    Public Vs. Private Tech Valuations: What's Driving the Divide?

    The gross valuations over the past five years are more indicative of the market than the true value of the company itself.
RELATED FAQS
  1. How can I protect my business from my spouse during a high net worth divorce?

    Understand what constitutes a high-net-worth divorce, and learn how business owners can protect their companies when going ... Read Answer >>
  2. What is the difference between economic value and market value?

    Learn about the differences between economic value and market value. Discover how they serve different purposes for businesses ... Read Answer >>
  3. What is the difference between enterprise value and equity value?

    Valuating a business accurately depends heavily on the purpose of the valuation. Learn how enterprise value and equity value ... Read Answer >>
  4. How do I value the shares that I own in a private company?

    Share ownership in a private company is usually quite difficult to value due to the absence of a public market for the shares. ... Read Answer >>
  5. What do you need to know to create a business model?

    Learn what a business model is, its importance and the primary elements that are needed in order to create a successful business ... Read Answer >>
  6. How is convertible bond valuation different than traditional bond valuation?

    Read about bond valuation, particularly the differences between how a traditional bond is valued and how a convertible bond ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center