Capitalization of Earnings for Business Valuation

The following are scenarios where utilizing the Capitalization of Earnings method for business valuation would be highly effective.

1. Earnings capacity contributes significantly to the company’s worth.·
2. Enough reliable ‘data is available to reasonably estimate expected normal earnings.
3. Current earnings levels a, e expected to approximate future earnings.
4. Earnings for the.subject company are significantly positive (that is, neither negative nor marginally positive).·
5. Expected growth rares are modest and predictable.
6. If valuing a controlling interest owners’ benefits can be reasonably estimated. (Such benefits include compensation, perquisites, personal expenses paid by company.)·
7. The company has significant intangible asset value.
8. The company adds significant value to its products or services through labor or intangible assets. .
9. Earnings are considered a better indicator of value than net cash now.

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Nate Nead

Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC, a middle-marketing M&A and capital advisory firm. Nate works with corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He holds Series 79, 82 & 63 FINRA licenses and has facilitated numerous successful engagements across various verticals. Four Points Capital Partners, LLC a member of FINRA and SIPC. Nate resides in Seattle, Washington. Check the background of this Broker-Dealer and its registered investment professionals on FINRA's BrokerCheck.

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