Question

Discus the concept of valuation. What is this concept about? Why is it important? What are some examples of valuation?

Answer 1

In finance, valuation refers to calculating or estimating the cost of any asset or a company with help of different valuation models or approaches.

Valuation is really important because it makes a party understand a clearer perspective of the value of assets it owns or a potential investment.

Examples of valuation -

DCF valuation

Discounted cash flow valuation is used to value stocks using the present value of future cash flows (dividends and principal)

Price multiple valuation

Price multiple valuation is used to value stocks with comparable analysis. For example PE of a company with similar companies in the industry comparison.

I hope this helps

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