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When evaluating a small start-up company, valuation becomes more art than science. Support your position with...

When evaluating a small start-up company, valuation becomes more art than science. Support your position with evidence or examples.

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Expert Solution

Valuation of a small company is based upon more of its growth stories and projection of its survival rather than profit reporting or balance sheet or capital structure.

Valuation of a small company should be done upon discounting of various qualitative factors which are dependent upon long-term survival and growth of the company. In the initial stages of a business of a company, company generally do not reports profits and it is highly loaded with debt so the chances of Survival are also low because these companies wants to grow on high debt by acquisition of more of the market share and the chances of Survival are lower and the risk are very high.they are most prone to any adverse economic situation.

So, the initial stages are more of qualitative factors to survive than quantitative factors to report, so it can be said that valuation is more of an art than science for smaller start up companies

jeff jeffy answered 1 year ago
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