1. Valuation Techniques
At the end of the day, when it comes to business valuation,
there are three main techniques, the asset approach,
the income approach, and the market approach. The asset approach, which
focuses on determining the fair market value of individual assets,
often includes the cost to build or the cost to replace.
In practice, the asset approach is really only used in special circumstances.
For example, liquidation analysis is used when a company files for bankruptcy.
More common than the asset approach is the income approach, which is also
known as an intrinsic valuation, the most common of which is a discounted
cash flow or DCF valuation. And finally, we have the market approach,
which is also known as a relative valuation.
This course will focus on DCF valuation and the two relative valuation approaches,
comparable companies and precedent transactions. In the next video, we will
talk about these in more detail. See you there.
2. Let's practice!