Finance / July 15, 2018 / Emmalynn Leach
The simplest way to value a business might be to look at its balance sheet. This is a list of the business’s assets and liabilities, showing the company’s net worth. Depending on the business, the balance sheet might show tangible and intangible assets and a variety of long-term liabilities, some of which you might be able to reduce through negotiations and invoking early-termination agreements. If it’s a complex balance sheet, you can simply take the assets you think you can sell quickly and subtract the liabilities to determine the company’s net worth for a fast sale.
Free cash flow is the cash flow available to all investors in a company, including common stockholders. FCF provides a useful valuation technique investors often use to derive a firm's value or the value of a firm's common equity. Often, investors will calculate a firm's value using FCF valuation model techniques and subtract net debt to arrive at a company's equity value in a simple capital structure.
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