In an increasingly crowded market, it becomes very important to know exactly how much your company is worth in the midst of several strategic movements by different entrepreneurs. It should be said that this is not only crucial to find out where to invest and how to expand your business, but also not to lose money in mergers, acquisitions or other changes in the composition of the company.
First of all, it must be understood that the company’s equity valuation serves both as a management tool and provides sufficient data to support strategic decisions, linked to various business and economic factors, such as when to buy new machines and equipment, or the volume of its cash flow and assets.
How Important is it to Evaluate a Company?
If a company has its value studied and calculated, it will be possible to arrive at better terms when it negotiates to sell, or even for an investor to know if it is a good deal. However, evaluating a company is important; for example, also when a succession of partners or owner will occur. Likewise, this is an essential practice if the company decides to enter the stock exchange, or even if it wants to measure the quality of its management as opined by Mink Wealth Management.
What is Business Fair Value?
But a company’s fair value does not only correspond to its set of objectively assembled physical assets and assets? It is also important to consider all that is linked to the benefits that it can generate in the future, that is, based on many subjective factors.
Methodologies of Evaluation
There are countless methods of evaluating a company.
Balance sheet or DRE: There is a balance sheet-based company valuation, or even in the DRE, Company Profitability Analysis, which are methods that focus on accounting values.
Goodwill: There is also the Goodwill that brings the balance sheet together to intangible values that do not appear in the accounting, such as the establishment’s strategic location and its client portfolio.
Discounted Cash Flow: Other models, such as cash flow and value creation valuation, as well as the FCD model-Discounted cash flow, the most widely used method today.