How to learn business valuation

Add up the value of your assets, subtract your liabilities , and you have the total value of your business.

The most common way to value a stock is to compute the company’s price-to-earnings (P/E) ratio . The P/E ratio equals the company’s stock price divided by its most recently reported earnings per share (EPS). A low P/E ratio implies that an investor buying the stock is receiving an attractive amount of value.

5 Common Business Valuation Methods

Two approaches are the foundation of valuation, discounted cash flow valuation and relative valuation . The first one is a bottom-up approach where the present value of an asset’s future cash flows is calculated, the second determines the value of an asset by comparing it to similar other assets.