Business valuation is the analytical process of determining the economic worth of a company or business entity. It is a critical exercise used by entrepreneurs, investors, financial analysts, and corporate management to make informed decisions related to mergers and acquisitions, investment analysis, partnership negotiations, estate planning, taxation, and strategic planning.

• Discounted Cash Flow (DCF): Projects future cash flows and discounts them back to present value using an appropriate discount rate, reflecting the time value of money and risk.
• Capitalization of Earnings: Converts expected earnings into value by dividing by a capitalization rate, often used when earnings are stable and predictable.

• Comparable Company Analysis: Values the business based on valuation multiples (like Price/Earnings or EV/EBITDA) of similar publicly traded companies.
• Precedent Transactions: Looks at recent sale prices of similar businesses in the same industry to estimate value.

Accurate valuation helps stakeholders understand the true worth of a business, reduces risks, and facilitates transparent negotiations. It also ensures compliance with regulatory standards and supports strategic decision-making for sustainable growth.

Valuing a business can be complex due to intangible assets like brand reputation, intellectual property, or customer relationships, which are difficult to quantify. Market volatility, industry dynamics, and unique business models also add layers of complexity.