If you frequently consume entrepreneurship related content, you must have often heard the term ‘valuation of a company’. A company’s valuation is estimating a company’s or asset’s value. The goal of learning how to calculate valuation of a company is to determine the price at which an owner would sell or a potential buyer would pay for a given asset.

Estimating business valuation is the first step in determining how much to offer a company, whether buying or selling it. Valuation helps you determine how much money you can raise by issuing stock or debt securities, and it helps you decide how much cash flow to reinvest in your business or distribute as dividends.

The term “enterprise value” can have different meanings for different investors. According to the Corporate Finance Institute, Enterprise Value (EV) is the measure of a company’s total value. For example, price is the most important thing for some investors when valuing a stock, while earnings are more important for others. Investors usually look at growth opportunities when valuing stocks because they want to know whether there will be any growth in the future.

In this blog, we will understand what is valuation, how to calculate valuation of a company, along with valuation of shares, what is enterprise value, and much more.