Company Valuation Definition and How is this different from Annual Accounts
Every company when commences the operation need to have some capital invested by the promoters or the owners of the company. Once the operations starts, the company try to run the business to create space in the commercial world with cash flows, production, sales and employment as parameters. The company when established may try to understand its valuation from time to time.
The company’s financial position can be understood by reviewing the financial records such as the profit and loss account or the Balance sheet however valuation is different from the financial performance or the financial ratios calculated to see the liquidity etc. The valuation takes into account various factors and is carried out by financial experts. It takes in to account the present financial position as well the future cash flows, the market potential and expected market share. It also takes into account the management and the decisions, the good will and the kind of product etc.
Goodwill is a major factor that gets added to the value.Valuation represent the value of the company at any point of time in case the company is on sale at that point of time. It helps to help the company to evaluate itself as well as other in case they are interested to purchase or invest in the company.