Business Valuation is a method of determining economic value of the business. Business value is generally the market price at which the buyer is required to pay in order to acquire such business as a going concern. The worth or value of any business is derived by taking into consideration of following aspects but not limited to:

1. Current Assets
2. Inventory
3. Fixed Assets
4. Price of Share
5. Future projected earnings
6. Historical Financial Performance
7. Short Term and Long Term Debts of the business

Business valuation is generally required when a company is willing to sell its business or a portion of business or for merger and acquisition, strategic planning etc.

Methods of calculating Business Valuation

There are numerous methods of calculating value of business but which method will be suitable to follow would entirely be depending on the purpose of such valuation. Few of such methods are discussed below:

1. Market Value

   It is the simplest method one can apply while calculating business valuation. Since they are mainly derived from the external market forces, it cannot be claimed to be the reliable one. Under this method valuation of business is calculated as Total number of shares outstanding multiplied by the share price of the company or by market price of such shares of the company engaged in same or similar business whose shares are actively traded on the stock exchange.

2. Discounted Cash Flow Method

   Discounted cash flow (DCF) is a method of valuation used to determine the value based on its projection of return or future cash flows. DCF is the most popular method of valuation. The DCF method generally calculates the present value of projected future earning of upcoming 5 years.

3. Net Assets Value Method/Book Value Method

   Net Assets Value Method/Book Value Method is construed as asset-based analysis of valuation of business. This method is used by taking into consideration the book value of assets less depreciation. This method is probably less reliable as determination of fair value of intangible assets becomes generally impossible.