Business valuation method

When valuing a company, the economic value should be based not so much on the profit and equity capital recorded in the accounts, but on a valuation based on (future) cash flow and the risk profile of the business. The profits in the accounts can be affected by accountancy rules, as a result of which it is not always possible to portray the business's correct return.

Analysis of business risks and free cash flow in the future

An investment decision has to deal with the minimal expected return on invested capital that you want to recoup. Another key element is the position of businesses and its intended strategy and expectations. When valuing a company we not only look at the annual figures, but also look back on historical trends and developments, analyse sector information, study macro-economic reports from financial institutions and sector organisations, process statistical market data and validate the management's forecasts. Once we have analysed this data we will be able to form a satisfactory and reliable picture of the business, the future cash flow and the risk profile.

Business valuation

The future cash flow is available to the providers of the capital and can be withdrawn from the business without jeopardising its continuity. This cash flow, in combination with the risk profile of the business, therefore determine the actual value of the business.

Valuation memorandum

The findings of the valuation of the company are presented in a valuation memorandum which includes, among other things, an assessment using other valuation methods, details of the various scenarios and a sensitivity analysis. 


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