Valuation Methodologies Explained
Asset-Based: Values the business based on net assets (total assets minus liabilities). Best for asset-heavy businesses.
Quick estimation method commonly used in acquisitions.
Earnings Multiple (P/E): Multiplies net profit by typical industry price-to-earnings ratios. Reflects profitability.
EBITDA Multiple: Multiplies EBITDA by industry standards. Popular for evaluating operational performance.
Discounted Cash Flow (DCF): Projects future earnings and discounts to present value. Most comprehensive method.