The 3 Fundamental Business Valuation Approaches

Valuation, in basic terms, involves determining the economic value of a business or company.  There are three different approaches that can help you reach a figure, and these are the market based approach, the income based approach, and the asset based approach.  Each of these have their own pros and cons, as you can see from the infographic below.

As any online master of science in finance student will tell you, valuations are important.  They can also be done for numerous reasons.  A business obviously needs to be valued before it is placed up for sale, but it also needs to be valued if you want to enter into a partnership, apply for a loan, or start divorce proceedings.  

The infographic graph explains the three fundamental business approaches and why valuations matter in more detail.

This infographic was created by the MS finance online department at Northeastern University.

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