Common Business Valuation Methods

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Common Business Valuation Methods

The method of assessing the correct economic value of a business or a business unit/company is known as business valuation. Obtaining a business valuation is critical because it provides facts and statistics that will assist management in evaluating the business, as well as assessing the strengths and weaknesses of competitors in the sector and gaining an understanding of the industry’s future trends, all of which will aid in the formulation of business strategies.

The company valuation in Dubai is very much important looking at the benefits of it and if we talk about business valuation, then there are 5 main methods of business valuation and in this blog, we are going to discuss about that.

company valuation in dubai

Following are the 5 common business valuation methods:

  • Asset valuation: Assets include tangible as well as intangible things of your company. Market value or book value of those assets is calculated to know the total value of the business.  As you degree your business enterprise’s asset valuation, make a listing of all cash, machinery, stocks, actual property, shares, options, patents, trademarks and consumer relation. 
  • Relative Valuation: In the relative valuation method, you can know how much the same type of business would earn if it was sold. Basically, it compares the value of your business assets to the value of other business assets of a similar type of business, thus by this valuation you can know how much would be a reasonable price of your business so that you can ask for it. You can also hire a firm for Company Valuation In Dubai so that you can know the appropriate value of your business.
  • Historical earnings valuation: The contemporary cost of an organization is decided by using its taxable revenue, capacity to repay debt and capitalization of coins drift or profits. The value of the business drops when it does not bring enough money to pay bills and if your business is able to repay the debt quickly with the help of positive cash flow then the value of your business increases. These all factors are used in the ‘historical earnings valuation’ method.
  • Future maintainable earnings: In business, your estimated profit in the future decides the value of your business today. This method of business valuation is used when your business profits are expected to be stable. To determine the potential value of your company’s maintainable profits, examine the company’s revenues, costs, income, and gross profits for the previous three years.
  • Discount cash flow valuation: If the profits of your business are not expected to be stable in the future, you should use the present value cash flow method. By this method, you can know the present value of your future cash flows (by discounting them). 

So, these are the most common business valuation methods that are adopted by businesses. You should also carry out your business valuation so that you know the worth of your business and can take important business decisions based on that. 

We at NUF Chartered accountants, based in Dubai, UAE can help you with your business valuation in Dubai, company incorporation services in Dubai, and many other financial services, so feel free to Contact Us.

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