The cost approach values a business based on the net assets (total assets minus total liabilities) a business holds. The approach uses the economic principle that a buyer will pay no more for an asset than the cost to obtain the asset of equal characteristics, and can be referred to as the “cost to replace”. […]
Intangible assets are those that are not stored or accumulated in physical form. Like all assets, intangible ones can be owned, transferred, or licensed, and they have value. An intangible asset can be any intellectual property or brand — trademarks, copyrights, and patents are all classified as such. Intangible assets usually exist in opposition to tangible […]
This post will take a dive into the concept of asset sales, an important concept in the domain of private business sales/transfers and their valuation. In an asset sale, a company sells some or all of its business assets to a buyer, but the company itself (as a legal entity) is not sold. Further, the buyer has the right […]
Key clients are great, right? But are they risky? And how might they be affecting your business’ value? Let’s address the importance of achieving a well-diversified client base to increase your business’ value, and how the reliance on key clients can impact the risk perceived by investors in your business, which can in turn […]
Discounted cash flow is the foundation on which all other valuation approaches are built. This method is commonly used by practitioners to derive a conclusion of value of an asset as part of the income approach, which is one of the three ways of approaching a business valuation. In this short article, we will explain […]
The income approach is one the most used methods to estimate the value of a business. Within this approach, there are two main methods, the discounted cash flow method and capitalization of cash flows method. In this post, we will take a closer look into how this approach works and what it means. What is the Income Approach? […]
If you’re interested in the world of finance and business valuations, you may have periodically heard the term “asset approach”. The following article breaks down what it means and will expand your knowledge on this interesting topic. Using an Asset Approach to Value a Company It’s understandable if you have no idea how much your […]
Valuing goodwill can be a tricky one, and it’s likely a bit misunderstood. However, it’s one of those important components in the valuation of a business that simply can’t be overlooked. In this article, we’ll look at some of the essential components of goodwill so that you can get a better understanding of how goodwill […]
What Is Inflation? Inflation is a term used to describe the change in price of a bundle of products and services over time. Normally, it’s defined as a rate. For example, if the total price of a bundle of goods and services was $100 a year ago and now it’s $105, then the inflation in […]
This post will take a small dive into some common ways to calculate the equity value of a company, focusing on private businesses. Valuing Equity Definition In short, valuing equity is the ownership interest in a business after subtracting the financial obligations (e.g., debt)/debtholder ownership). Company Value – Debtholder Ownership = Equity Value Valuation professionals […]