The Value of the Firm

Abstract

There are several factors that determine the value of a company, all important and relevant in order to achieve the full exploitation of corporate assets. Some of them are the history and nature of the business, the economics of the industry, the book value and financial condition of the business. Valuation can be based on several methods, and it is possible to perform corporate valuation starting from either the balance sheet of the company, or its income statement. Another class of methods involves the goodwill as a measure of the projected corporate profitability and therefore, as the primary figure that adds up to the discounted cash flows from income. Overall, all the presented methods rely on the knowledge of the financial situation of the company and the ability to project the figures to the immediate future in order to define scenarios for the future profitability of the firm.