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.