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General Information

Business Valuation

No business valuation is precise. To put it in a better way, all valuations are and will always be wrong because in finance, here are too many moving factors in addition to be required subjectivity when making analyses, for valuations to ever be accurate. However, it is better to be vaguely right than precisely wrong.

“Einstein was right about relativity, but even he would have had a difficult time applying relative valuation in today’s stock markets.” 
Aswath Damodaran,

“As the celebrated investor Warren Buffett once said, “Price is what you pay. Value is what you get.” We would add one more line: “If you do your homework.” In business deals, most buyers and sellers have a singular focus on price — and price is hard to avoid. Negotiations ideally produce numbers that both sides can be happy with. But getting to the right price in any deal involves understanding what business assets are truly worth and then structuring a deal around financing and tax realities, which can be quite surprising to those who fail to plan.” 
Lisa Holton

Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation.

Warren Buffett
“These organizations agree on three major approaches to business valuation:  The asset approach: Also known as the cost approach, this valuation approach is based on finding the fair market value of assets (the easiest ones to value are tangible assets) and deducting the liabilities to determine the net asset value or the net worth of the business.  The market approach: This approach compares your company or a target company with similar companies. You can use comparisons to publicly traded companies or actual sales transactions for similar businesses. These valuations are frequently expressed in ratio form.  The income approach: This approach focuses on the future economic benefits you’re anticipating from a business —better known as income. This amount is expressed in today’s dollars, and is also known as present value.” 
Lisa Holton

Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.

Albert Einstein
“A firm can have value only if it ultimately delivers earnings.” 
Aswath Damodaran

When a new idea comes our way, we must put it on our mental scales and weigh it carefully before deciding its value.

Jim Rohn
“When the economy is good and everyone is making money, banks and other lenders can be surprisingly loose about demanding adequate valuation of the assets they’re basing their loan amounts on. But when times get bad, it’s just like Robert Frost once said: “A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” 
Lisa
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