Advanced Corporate Finance - 'Company Valuation is an art not a Science.' - Essay Example

Valuation of a company is very difficult and it takes a lot of efforts for the company to access the right price of the company. There is however never a right or wrong price for a company and the price of companies depends a lot on a number of different factors. The main aim of this essay is to understand and highlight the various aspects for valuing of a company. Also aims to evaluate and argue about the various aspects of the company. It is essential to note that any business person entering into a business should have a valid exit plan.

An exit plan from the market is very essential for any business. This is mainly a consideration when a business requires leaving the markets either due to a loss or even when a business plans to dissolve. As a part of the exit plan, the most essential point to be noted that while entering into a business the business person should also consider one aspect i.e. what the business is worth. Business valuation is an industry by itself (Feechan, 2006). The valuation of business can be done by the company itself or even by professional companies that mainly deal with business valuations.

The valuation of companies can be based on a number of different aspects, like the net assets, discounted cash flows, etc. These valuations however do not give the full view and story of the company (Bytestart, 2008). There are a number of different modes for companies to be valued. The correct use of the various available valuation formulae will give a better view of the company and will help also provide for the amounts that a buyer might be interested in paying for the company, however this is not necessarily the selling price as the company can only be sold at a price that the buyers will be willing to pay.

It is in the case of both the parties, the sellers want to gain as much as possible and the buyers want to pay as little as possible. This however cannot be argued as both the parties are always justifiable in both the cases