A business valuation, also referred to as a business appraisal, is an analysis designed to determine the worth of a company or operating unit. Business valuations can be used for a variety of strategic (e.g. determining value for sale/merger, benchmarking growth ) and formal (e.g. estate and gift planning, executive compensation planning) planning purposes.
Depending on its purpose, a business valuation can present a range of likely values or deliver a more precise conclusion of value. There are various approaches and premises that can be employed when performing a valuation depending on underlying objective. In any instance, a full understanding of a business, how it operates and the risk associated with it is needed to determine the economic value of a business.
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