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Context of DCF: There are three main approaches to calculating a company’s value. the intrinsic or income-basedapproach, also known as an entity approach, then there is also 2. the asset-basedapproach also known as the cost-basedapproach, and finally 3. The first is 1.
Valuing a Small and Medium-sized Enterprise (SME) involves assessing the company’s financial performance, assets, market position, and growth potential. The three main methods for SME valuation are the Income Approach (e.g. Discounted Cash Flow analysis), MarketApproach (e.g. net assetvalue calculation).
As we proceed, we’ll simplify the complex SME valuation process, factoring in unique SME attributes such as inconsistent cash flows, reliance on a restricted client base, and constrained access to capital, which heavily influence their value. How to value an SME? What are the Key Valuation Methods Used for SMEs?
Different methods are used, like looking at market prices, predicting future profits, and evaluating assets. Some techniques include comparing companies in the market, estimating future cash flows, and assessing the value of tangible assets. to its marketvalue.
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