How do we value a business?

shubhwadhera
Posts: 1
Joined: Fri Jun 15, 2012 5:11 pm

Re: How do we value a business?

Postby shubhwadhera » Fri Jun 15, 2012 5:17 pm

You generally value a business based on its current assets = debt + equity. This is the most basic equation to get a hint of what a business would be worth in the present, equal to what assets it has!

However, the appropriate valuation formula to use is Enterprise Value= Mkt Val(equity)+ Mkt Val (debt) - cash - short term investments

Another way, would be to estimate the FCFF (cash flow to firm) for a finite period 5- 10 yrs and discount it using WACC; post the finite horizon, use assumptions and again discount the FCFF at WACC. Now, forecasting the FCFF for a company is the prime exercise for an analyst.

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amar.cbs
Posts: 3
Joined: Wed Jul 04, 2012 6:07 pm

Re: How do we value a business?

Postby amar.cbs » Mon Jul 23, 2012 10:34 pm

Hi,

Please refer to the following link for an article on business valuation. Trust you find this useful.

http://nirc-icwai.org/member/Jan1102.pdf

Regards,
Amardeep


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