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Asset-based Approach: The asset-based approach evaluates a business’s worth by considering its tangible and intangibleassets. Tangible assets include machinery, inventory, and real estate, while intangibleassets encompass intellectual property, goodwill, and brand reputation.
By looking at key financial metrics like price-to-earnings or enterprisevalue-to- EBITDA , you can gauge the company’s relative valuation. P/E, EV/EBITDA) Use the average of these ratios to estimate the value of the target company. Compare valuation ratios (e.g.,
Analysts use financial metrics and multiples such as Price to Earnings (P/E), Price to Book (P/B), EnterpriseValue to Sales (EV/Sales), EnterpriseValue to EBITDA (EV/EBITDA), and Price to Book (P/B) ratios derived from trading data of similar public companies or deal pricing data of similar M&A transactions.
Two commonly used asset-based approaches are: a) Book Value Method: The book value method calculates a company’s net assetvalue by subtracting total liabilities from the fair market value of total assets. It is calculated by dividing the market price per share by the EPS.
Two commonly used asset-based approaches are: a) Book Value Method: The book value method calculates a company’s net assetvalue by subtracting total liabilities from the fair market value of total assets. It is calculated by dividing the market price per share by the EPS.
Asset Composition : The nature of assets held by the company, including both tangible and intangibleassets, affects valuation. Intellectual property, real estate, and equipment are examples of tangible assets, while patents and trademarks represent intangibleassets.
Market-Based Valuation Market-based valuation methods determine the value of a business by comparing it to similar companies in the market. The Comparable Company Analysis (CCA) compares key financial ratios and multiples, such as price-to-earnings (P/E) ratio or enterprisevalue-to-sales (EV/S) ratio, of similar publicly traded companies.
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