Business valuation Virtual Auditor is an important method and a simple set of methods used to evaluate the monetary value of the total economic value of an interested owner’s interest in a specific company. Financial market participants use valuation as a method to obtain a fair value for the total value of the assets, including intangibles and liabilities. The method is primarily intended to provide accurate but reliable information to the decision makers about the value of a business so that they may decide whether to purchase or dispose of it.
There are several methods used in business valuation, including the method of fair value, the income capital structure method, the cost method and the alternative method of the present value of money. Fair value is the most widely used method and it is based on the value of the business less any required debt for purchase. A typical example would be a business, bought at a discount in the cash market while its net worth is unknown. In this case the method of fair value uses the discounted value of the business to calculate the net value.
Many companies are not sure how to do business valuation and therefore choose to ignore it. They believe that it is unnecessary and probably not an accurate way of determining the value of their company. However, it is very important to do business valuation, since the number of failed businesses is on the rise and failure may be the reason for that increase. Many small companies cannot afford to ignore business valuation, as the failure of a small business could have a serious effect on the development of the company and the success of the venture.