Valuations of cashflows

One of the most important aspects of the business plan are the financial projections of cashflows anticipated to be made in the business.

A cash flow projection:

- Demonstrates to your potential lender that you will be able to pay back your loan
- Helps you to determine if your pricing is high enough to cover all of your costs (including lending costs)
- Allows you to determine if you have the correct number of staff and equipment for the business that you forecast
- Shows you exactly how much you need to borrow (and when)
- Demonstrates whether your business idea is viable
- Helps you identify all of your expenses

 

Valuing a Business

Many established entities often design an Intellectual Property product or even arrive at a point whether they would like to sell their businesses. In this case, the valuation of that business becomes critical ndividuals, businesses and the financial community value companies in a variety of ways. Three significant approaches include:

1. The Relative Value Approach

With these methods, analysts determine whether a company is overvalued or undervalued by comparing its current Price/Earnings Ratio to one or more of the following indicators:

- the past P/E multiple of similar companies;
- certain financial ratios;
- earnings and dividend growth rates.

 

 

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