Valuation

Valuation is the analytical process of determining the economic worth of a business, asset, or security. It is used to provide an objective measure of value, which informs a wide range of corporate finance activities including mergers and acquisitions, capital budgeting, and investment decisions. The process involves a combination of objective measurements and subjective professional judgment, relying heavily on data from a company’s financial statements and projections.

A credible valuation depends on robust inputs derived from a detailed financial model. These models project future performance and incorporate key metrics like revenue, EBITDA, and free cash flow (FCF). Different methodologies may be used depending on the company's industry, size, and stage of development, but the goal remains to arrive at a defensible estimate of intrinsic value to guide strategic decision-making.