A company’s valuation refers to the process of determining the economic value of a business. A business valuation can be carried out to establish partner ownership, taxation and sale value. Owners of companies often seek advice from professional business evaluators to get the value of their businesses. In the valuation of a company, the evaluators examine the vision and the mission of a company to ascertain whether the business has growth potential. Also, the evaluators look at the income the company gets and the number of clients it has. Company’s valuation includes examining its growth prospects, the history of earnings, the clients and the reputation of an organization.
The valuation of a company is determined by its growth prospects (Trembly Law Firm, 2020).This aspect examines the likelihood of a company to grow in future. A company with high growth potential has more value. The earnings history of a company determines its value; an increase in the gross income of an organization will create a positive impact on its valuation. The concentration of customers in a company determine its value, a company that has a large number of clients has a good value (Opus Advisory Partners, 2020). Also, the reputation that a company holds will determine its value. A firm that has a good reputation will also have a positive valuation.
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Most companies strive to uphold a good reputation. Chapter twenty-two of the book of Proverbs, verse 1, states that a “good name is to be desired than great wealth”, this verse implies that a company that has a good reputation will have more value. High value is derived from a business that depicts the potential to grow. The number of customers that rely on a specific business determines its value. Few customers are equivalent to a low value and vice versa. The profit that the company derives from its business is determinant for its value. If the company does not make a profit, its value will be low.
References
Opus Advisory Partners. (2020). FACTORS THAT INFLUENCE VALUATION | Opus Advisory Partners . Opus Advisory Partners. Retrieved from https://opusap.com/insights/factors-influence-company-valuation.
Trembly Law Firm. (2020). 6 Key Factors that May Impact a Business Valuation . Trembly Law Firm. Retrieved from https://tremblylaw.com/6-key-factors-may-impact-business-valuation /.
