Originally published: 19/03/2018 13:09
Publication number: ELQ-67846-1
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Valuation Concepts

This video talks about some basic valuation concepts for those who'd like to learn about how a business is valued.

What dies the value of a business actually represent? The value of a business, or the amount someone is willing to pay for a business, is a function of how much an investor thinks they'll be able to get out of a business in the form of distributions. When you think of how distributions is produced from a business, its useful to think about the profit and loss statement. A business earns revenue, it pays expenses, leaving you with an operating profit or what is called Earnings Before Interest, Tax, Depreciation, and Amortization. Then the company makes investments; the cost of which is smoothed through depreciation. If the business has any debt, it'll then pay interest in principle on this, as well as tax. What is ultimately left is attributed to the owner as Net Profit Over Tax. This should all be kept in mind as the video goes on to explain various valuation concepts.

Length: 4 minutes 51 seconds

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