Thread by @derealdima

The Various Ways of determining the #value of a #company/#business

It can be tricky to determine to value of a company.
Most businesses hype their numbers while some don't even know theirs.

Let's see how...
I'm gonna try to keep it very simple, nothing too technical here.
🧵

#Asset Approach:
The most common way of knowing the value of the company is by calculating at the value of assets it has (also accounting for it's liabilities obviously)

However, this might not be the best way to value every business.. it might suit some over others.

#Income Approach:
This is by far my favourite, cos I believe the real value of a business is in it's income.

We do this by dividing the annual earnings by its capitalization rate. The C.R is the value that is used to convert a company's annual earnings to its company value.

#Market Approach:
This method looks at what other similar companies are worth on the market.

To calculate the company value using this approach, you take the share price of the most similar company and multiply it by the total number of shares the similar company has.

So there you have it, 3 ways you can value your business; you can use all btw.

Now you can know the value of your business without overrating or underrating it.

Which is your favourite? Tell me below.
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