EXCEL MODELS FOR BUSINESS VALUATION
Simulation financial models in the field of business valuation.
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RATIONALITY OF SIMULATION MODELS FOR BUSINESS VALUATION
There are many methods for business valuation. One of the most useful classifications of these methods is the one that distinguishes between those that are based on analyzing historical data, as opposed to analyzing future data. There is a fairly general consensus among experts when it comes to recommending valuation methods that are based on future estimates, in relation to those that prevail over data from the past. The main reason is to consider that a business is worth while it is capable of “generating wealth”, and that generation of wealth will occur provided that the business is capable of generating “positive cash flows” for shareholders, once that all operating, investment and financial costs have been covered. The financial simulation models for business valuation in Excel, based on the «discounted future cash flows», serve to give an adjusted approximation of what the value of the business may be, based on those expectations of wealth generation in the future.