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 which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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