A business valuation is a general process of determining an entire business or company unit's economic value. Business valuation is used to determine the fair value for various reasons, including sale value, establishing partner ownership, taxation, and even divorce proceedings or looking to merge with or acquire another company.
There are numerous ways to have an accurate picture of the real value of a company. When valuing a company as a going concern, we use several valuation methods, including market capitalization, revenue method, earnings multiplier, Discounted Cash Flow (DCF) method, book Value, and liquidation value. Notable, the ability to apply them sufficiently and reflect the business and the environment's risks are substantially different and change depending on the circumstances.
That is by no means an exhaustive list of the business valuation methods in use today. Other methods include replacement value, breakup value, asset-based valuation and still many more.
Value creation is the foundation of business. Whether for shareholders, workers, families and communities, or myriad other stakeholders, the ability to identify the sources of value and create it is the leader's enduring mark. So the key to any valuation in a restructuring environment is to understand what is going on in the company by trying to answer the following: why have sales or margins collapsed; what is the route back to profitability; how will this be funded; how long does this take and, what is the end game?