Valuation Inputs
These are the critical pieces of data required to perform a robust valuation.
Financial Statements: The foundational data.
Income Statement: Reveals profitability (Revenue, Gross Margin, Net Income, EBITDA).
Balance Sheet: Shows the company's financial position—what it owns (Assets) and owes (Liabilities) at a point in time.
Cash Flow Statement: The ultimate truth-teller, showing how cash is generated and used from operations, investing, and financing activities. Free Cash Flow is a key output.
Growth & Return Metrics: The forward-looking drivers.
Growth Rates: Historical and projected growth rates for revenue and earnings indicate the company's trajectory and potential.
Discount Rate: The investor's required rate of return, which is directly tied to the perceived risk of the investment (see next section).
Contextual & Market Data: The external checks.
Industry Data: Analysis of comparable businesses provides benchmark multiples and performance metrics.
Market Conditions: The broader economic environment (e.g., interest rates, inflation, economic cycle) significantly impacts valuation.
Trends: Analyzing business performance over time (e.g., margin trends, customer acquisition costs) provides insight into its stability and direction.
Risk & Verification:
Credit History: Assesses the company's ability to meet its debt obligations, a key risk factor.
Due Diligence: The process of rigorously verifying all financial, legal, and operational assumptions before finalizing a valuation or deal.
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