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Briefly describe the business valuations as well as its purpose (also known as company evaluation) and...

Briefly describe the business valuations as well as its purpose (also known as company evaluation) and choose a suitable valuation method and explain a little bit more detail.

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Business valuation is a process used to estimate the economic value of a business. Business valuation can be used to determine the fair value of a business. There are many purposes to use business valuation, some of which are for taxation, sale , establishing partnership interest or divorce proceedings.

There are number of methods which are used for valuation of business. Some of them are Asset valuation, Relative valuation, Discounted Cash flow and so on.

Discounted Cash flow method is based on cash flows rather than profits because cash flows are more stable and difficult to manipulate as compared to profits. This method is used when the cash flows are stable. It takes into consideration the future net cash flows and discounts them to the present day, which gives us the figure of what revenues can our assets generate in the future.

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