Valuation Flashcards
is the monetary, material, or assessed worth of an asset, good, or service.
Value
The analytical process of determining the current (or projected) worth of an asset or a company is called
valuation.
Determine the —— —– of a security, which is determined by what a buyer is willing to pay a seller.
FAIR VALUE
is equal to the price paid per share in the financing round multiplied by the number of shares outstanding** before** the financing event
Pre-money valuation
valuation is equal to the price paid per share in the financing round times the number of shares outstanding** after** the financing event.
POST-MONEY VALUATION
refers to the value of a company not including external funding or the latest round of funding.
Pre-money valuation
refers to how much the company is worth after it receives investment money.
Post-money valuation
is best described as how much a startup might be worth before it begins to receive any investments into the company
Pre-money
includes outside financing or the latest capital injection.
Post-money valuation
It is determined by several factors, including the team behind the company, their network, what stage of development the company is in, whether it has a proof-of-concept, and any sales already made.
valuation of a startup or start up valuation
The valuation of a startup is an assessment of
the value of the company
Valuations give investors and stakeholders ——- ——– they need to make an informed decision.
Crucial Information
Start-ups frequently lack —- — —– —– making it difficult to evaluate their performance, revenue creation, and potential profitability. Traditional valuation techniques may be less useful as a result of this data shortage.
Lack of Historical Financial Information
Because startups operate in rapidly changing marketplaces, it is challenging to predict their future growth. Uncertainty in the valuation results from the difficulty of estimating the size of the addressable market and the capacity of the company to gain market share.
Uncertain Future Performance
Startups frequently propose ground-breaking technologies or unique business strategies that may lack proven standards or———-. It is difficult to locate comparable businesses for value reasons due to this uniqueness.
Lack of Comparables
To support their expansion, start-ups often depend on several rounds of funding. Based on investor opinion, market conditions, and the company’s development, valuations may change between various funding rounds, complicating the valuation process.
Dependence on Funding Rounds
Because it mainly relies on presumptions, market trends, and investor opinions, valuing start-ups entails some subjectivity. Divergent valuations may result from different investors’ varied levels of risk tolerance and growth forecasts.
Subjectivity and Biases
TYPES OF VALUATION
The amount of money realized by selling a firm’s assets and paying off creditors
Liquidation Value
The value of a firm as an operating business
Going concern Value
The accounting value of a firm or an asset
Book Value
The transaction price of the asset in the marketplace
Market Value
The true value of an asset
Intrinsic Value
VALUATION METHODS
- based on the financial accounting concept that owner’s equity is determined by subtracting the book value of a company’s liabilities from the book value of its assets
- buy/sell agreements
Book Value Method
- used to value a business based on the difference between the fair market value of the business assets and liabilities.
- estimating the value of a non-operating business
Adjusted Net Assets Method
