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Introduction - A Brief History of Valuation & Security Analysis


IACAM has created an essential list illustrating the core concepts of public and private business valuation. These key principles can be found in the free, online-version of The Executive's Guide to Business Valuation. To view this free IACAM executive guide, please click the blue link above.

The following is an excerpt from Chapter 1, Introduction, from the Executive's Guide.

A Brief History of Valuation and Security Analysis

A  cynic  to  the  merits  of  valuation  would  just  have  to  consider  Buffet‘s  successful emphasis on the DCF (discounted cash flow) valuation method to grasp how appraisal considerations are truly advantageous in long-term investing. The discounted cash flow method  is  presented  in  this  text  with  examples  of  several  variations.  According  to Buffet  and  other  financial  legends,  cash  flow-based  DCF  valuation  is  king.  It  is  no surprise that Berkshire Hathaway, as of this writing in 2008-2009, was sitting on over $40  billion  in  cash  amidst  an  economic  recession  and  weakening  capital  markets.  In particular, amidst the turmoil of September and October 2008, Buffet was in true form by making acquisitions of businesses generating sizeable free cash flow. The importance of free cash flow to long-term value is a mainstay of business valuation.

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