Appraisal Approaches and Business Valuation

Previously we have described in detail the three valuation approaches of an Appraisal Report.  However, those descriptions centered on real estate being the subject asset and given this, Capital Corp Merchant Banking feels it is imperative to also briefly discuss those approaches in regards to a business valuation.
The income approach for business valuation is the same fundamental calculation of real estate with the only change being the type of income used.  In a business valuation it is at the discretion of the appraiser to use cash flow, earnings or similar type of matrix.

The cost approach for a business valuation is not based upon “reconstructing” an asset but rather utilizing financial statements and research to determine the fair market value of its assets/liabilities.

The final approach, sales, is quite similar to that of real estate except that comparables are based on a similar business or a company that is publicly traded.  Although exact comparables may be limited, the appraiser has the ability to utilize that public information to determine a market value.

For more information about Capital Corp Merchant Banking, kindly review our website at http://www.capitalcorpmerchantbanking.com.

Respectfully,

Capital Corp Merchant Banking, Inc.