Valuing a start up business Essay Example | Topics and Well Written Essays - 500 words

Valuing a start up business - look for ExampleHistory forms a very good foundation in evaluating and valuing a business. However, young companies scram little or no history many have only one or dickens years of data available on operations and financing (Audretsch & Link, 2012). This unavailability of data further compounds the rating of a start up since data forms the major building block of any business valuation.The do of data accumulated from the start-up business dictates the ease with which the business can be honord. This means that the duration that a start-up has taken is very important in assessing its value. If a business has existed for quite long it becomes easy to value it as opposed to shortly existed business.Nonetheless, there are a number of alternative approaches that can be employ in valuing a start-up business depending on the business in question. Selection of the approach is establish on the nature of the business and the market. One of such approach is valuing cash flow from existing businesses.In this approach the cash flow of already established business is evaluated. This will help know the pass judgment return of the business and payback time of the business (Schell & Tyson, 2012). The cash flows of any business is examined using its present, rising values and interests.Various ways of measuring cash flows are employed in order to analyze financial instruments like loans, bonds, and dividends. These ways of measuring cash flows are Internal Rate of Return, Net commit Value, Annuities and Perpetuities. They are called time value of money techniques.Perpetuities-These are annuities which last forever under assumption. This means that when valuing confederation the dividend is considered as a perpetuity. These cash flows grow uniformly throughout the time.Net Present Value- this involves evaluating unequal cash flows, both positive and negative. A time value of money technique can be used in this case to generate the presen t value of future cash flows. This