• Briefly explain business valuation and its purpose (also referred to as company valuation).
• Select a valuation method and describe why you might use that method to value a business.

Common methods utilized in business valuation can be assembled into several generalized approaches. Although not 100% inclusive, a valuation analyst can and will utilize these methods in each approach. Some consist as follows:

• The Asset-Based Approach consists of the book value method and the adjusted net-asset method. In addition, the adjusted net-asset method is based on three principles: replacement cost, liquidation, and going concern.
• The Income Approach consists of the capitalization of the earnings/cash flows method and the discounted earnings/cash-flows method.
• The Market Approach consists of the guideline public company method, comparable private transaction method, dividend-paying capacity method, and the prior sales of interest in the subject business.