1. What Is Company Valuation?

Company valuation is the process of determining the economic value of a business. The basic formula calculates valuation by subtracting total liabilities from total assets, representing the company's net worth or equity value.

2. How Does The Calculator Work?

The calculator uses the fundamental valuation formula:

Where:

• \( \text{Assets} \) — Total value of all company assets ($)
• \( \text{Liabilities} \) — Total value of all company debts and obligations ($)

Explanation: This formula represents the book value of a company, showing what would remain for shareholders if all assets were sold and all liabilities paid off.

3. Importance Of Company Valuation

Details: Accurate company valuation is essential for investment decisions, mergers and acquisitions, financial reporting, securing financing, and determining shareholder equity.

4. Using The Calculator

Tips: Enter the total value of all company assets and total value of all liabilities in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between book value and market value?
A: Book value is based on accounting records (assets minus liabilities), while market value is what investors are willing to pay for the company, which may be higher or lower.

Q2: What types of assets are included?
A: All tangible and intangible assets including cash, inventory, property, equipment, patents, and intellectual property.

Q3: What liabilities should be considered?
A: All debts and obligations including loans, accounts payable, accrued expenses, and long-term liabilities.

Q4: When is this valuation method most appropriate?
A: This method is most useful for established companies with stable asset values and for quick preliminary valuations.

Q5: Are there other valuation methods?
A: Yes, other methods include discounted cash flow analysis, comparable company analysis, and precedent transactions analysis.