FLOW VALUATION METHODS The Two Financial Flows That Matter Paramount to understanding the basics of valuation is recognising the financial flows within the firm. Any business is affected by two financial flows: The first and in my opinion the most important is its cash flow, which is the cash generation and expenditure of the firm … Continue reading Business Valuation 102.3 – methods of valuing a firm FLOW VALUATION METHODS
RELATIVE VALUATION MODELS When a firm has grown to a size that the ‘rule of thumb’ approaches are no longer appropriate then some form of market based pricing methodology must be used. The principle here is to find some common variable within companies which appear to be consistently priced by the capital market. As expected, … Continue reading Business Valuation 102.2 – methods of valuing a firm- Relative Valuation
INTRODUCTION TO VALUATION In an efficient capital market, the best estimate the value of the firm is given by the current share price multiplied by the number of shares in issue. There is only one element of value which is missing from this calculation and that is the difference between the firm as it is … Continue reading Business Valuation 102 – methods of valuing a firm, 102.1 Asset Valuation method.
Simple interest is based on the principal amount of a loan or deposit, which remains constant while calculating it against the interest rate, which is a percentage of the principal amount of the loan. Compound interest is based on the principal amount plus the interest that accumulates on it in every period, i.e. at the end of each period, … Continue reading Difference between Simple interest and Compound Interest
Basic of valuation, why a business may need to be valued and the methods applied in their valuation.