Join Jim Stice for an in-depth discussion in this video Cash flows, timing, and risk, part of Finance Foundations: Business Valuation.
- Let's say that our mutual friend has asked me or you…to become a partner in an online retail business.…This online retail business takes online orders…from customers and then arranges shipment…of the goods by various suppliers.…The major cash outflows for this business…are the compensation for the employees…and the cost of the physical assets,…the servers, the regular computers,…and the office costs, rent, utilities, insurance.…The major cash inflows for this business…is the commission fees received from the suppliers…who pay the online retailer for attracting…the buyers online.…
So our friend has asked me to become a partner…by investing $100,000 of my hard-earned cash…into this business.…Well, with my $100,000 investment,…will I now be a 5% owner?…A 20% owner?…A 75% owner?…Of course, it depends on what the business is worth.…So, before investing my money in our friend's business,…I need to value the business.…Now, a quick note.…This discussion is merely intended…to give you an idea of the process…involved in such a business valuation.…
Make sure to check out the Stice brothers' other accounting and finance courses to understand the other economic factors that impact your business.
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- Using market, cost, and income approaches to business valuation
- Valuing homes
- Valuing companies by multiples
- Using price-to-sales ratios to value companies
- Using discounted cash-flow analysis to estimate value
- Valuing McDonald's as a case study