Understanding Investors’ Required Return
In the previous article we discussed Discounted Cash Flow valuation methods. These well-known methods discount future cash generated by the company to understand its value today. The cash flows are discounted according to the risk of realization. Indeed, the higher the risk that these cash flows will materialize, the lower their value today.
However, the discount rate used has another…
Startup Valuation and Division of Equity between Entrepreneurs and Investors
Not the usual article!
This article is not the usual article you can find in our blog. Instead this is an essay on startup valuation that I wrote a couple of months ago. It presents a completely new way of looking at startup valuation and division of equity. The answers to a survey on valuation are presented first while later on the new framework and its advantages are discussed. Do you want…
Valuation Principles: Liquidation, Time Value Of Money, Multiples
Can you actually put a price on something that changes as quickly as businesses?
The answer is…yes!
But before we do that, we need to talk about the underlying valuation principles and lay down a framework for valuing businesses.
To understand the valuation of a company we first have to identify what the definition of the term “company” is.
The definition I like the most is one that…
5 KPIs to Grow your Business
Business metrics are important measures of company processes, and unlike gut-feeling (which needless to say is also an important managerial tool) can be both quantifiable and meaningful. These numerical representations are critical components of a managers’ role in monitoring company practices. Obvious examples of useful metrics include a CFO checking the status of revenues across quarters, or a…