Valuation

The Valuation analysis is done when there is a need for an external funding, or in case you want to buy or sell the business. Based on the valuation, you can decide what is the part of the business shares that you are willing to give to the investor for a certain amount of investment. A value analysis which is done on a periodical basis is also important to measure the success of the management. If the manager has succeeded to increase the value of the business, this may be more significant for the shareholders than the profit the business has created.

It is important to stress that business valuation is not an accurate measurement, especially if we base it on the business potential and future achievements. Usually the valuation results will be used as a basis for the negotiations between the owner and the investor. The final value of the business will be influenced by many other factors such as the benefit each side will derive from the investment, the objectives of each side, the business goodwill and management, the level of control that each shareholder will have over the business operations, etc.

The Valuation module offers two commonly used methods to evaluate the company’s worth.

Free Cash Flow

In this method the value of a business is based on the future free cash that it will generate

Price / Earnings

A company’s value under this approach is based on the assumption that the company value should be similar to companies whose shares are traded in the stock market.

EVA Analysis

Analyze the Economic Value Added