Income-Based Methods of Business Valuation

Income-based valuation involves capitalizing present or future cash flows to determine a company's value. It differs from market-based and asset-based approaches by focusing on the company's ongoing operations. However, future cash flows are speculative, posing challenges. Common methods include earnings capitalization, discounted cash flow, and economic value added.

What is the primary focus of income-based valuation?

• Analyzing market trends

• Capitalizing cash flows

• Assessing asset values

• Evaluating industry comparables

How does income-based valuation differ from market-based valuation?

• It evaluates market trends

• It capitalizes cash flows

• It uses industry comparables

• It focuses on asset values

What is a major challenge in income-based valuation?

• Predicting future cash flows

• Finding industry comparables

• Assessing asset values

• Analyzing market trends

Which of the following is a common approach to income-based valuation?

• Industry comparable analysis

• Asset value assessment

• Earnings capitalization model

• Market trend analysis

What model is particularly used for valuing stock of mature companies?

• Capital asset pricing model

• Discounted cash flow model

• Economic value added

• Earnings capitalization model