Accounting

Based on the net equity value on the balance sheet (little used method).

In order to reach the book value of a business, it is necessary to add all the accounts of its current assets (cash, amounts receivable from customers, prepaid expenses, etc.) and non-current assets (real estate, machinery, stock, equipment, vehicles, etc.) . Then, subtract the debts and other obligations present in the current and non-current liabilities (labor obligations, suppliers, tax obligations, etc.) of the company.

Liquidation

Considers the sale of all assets listed in the balance sheet, such as real estate, machinery and equipment. From this, the available money is added up to obtain a result, from which all debts are discounted to obtain the company’s value. This method is simple to calculate, however, it is limited to fixed assets and does not consider other information such as, for example, the company’s current client portfolio.

Market

It is the value of the publicly traded company based on the value of stocks in the market.
Stock price x number of shares

Multiples

The value is estimated through the application of a reference factor, which is based on companies already evaluated that operate in the same segment, this factor being multiplied by the number of profits, revenues (adjusted net income from financial expenses, taxes and depreciation and amortization). In this method, it is considered, for example, that the company is worth “N times”. The evaluation by multiples does not include, among other things, the possibilities for future growth of the segment.

Discounted Cash Flow

In this method, the value is measured based on future benefits that the company may generate. It is much more complete than the previous methods, as it better portrays the fair value of the business. It includes the forecast of the external environment (consumers, competition, economic situation, globalization, etc.) which will impact the future estimate of the growth of revenues, costs and expenses in a predetermined period. The method also considers the risk according to the segment in which the company is inserted and the cost of capital over time for shareholders and third parties. In addition, it becomes indicated because it complies with the new accounting rules (in Accounting Manuals) that prescribe that “Asset is a resource controlled by the entity as a result of past events and which is expected to result in future economic benefits for the company. entity”.