Determining a company’s fair market value is an essential financial skill. A company valuation, also known as a business valuation is the process of assessing the total economic value of the company’s operations and assets used in the business.

Asset Method – The simplest way to value a business is to subtract its liabilities from assets. Although it sounds simple it can be very unreliable but is considered in a professional valuation.

Discounted Cash Flows Method – Another method of calculating the value of a company is with discounted cash flows (DCF Method). This is the most common and best recognized method. The DCF analysis is the process estimating the value of a company based on the cash flows it is expected to earn in the future.

Market Method – The third commonly used method is the market comparable method. This method values the company based on published actual sales metrics. This method can be unreliable and often serves a sanity check to the valuation methods other valuation approaches..