Abstract: This paper focuses on the main tools and techniques of firm valuation. One of
the objectives in this paper is to present the reasons for such differences in value across
different models, and to help in choosing the right model for a specific task. In today's
management literature there are a lot of evaluation models, which based on the different
approaches. The most important dimensions in the evaluation are the past performance
analysis, the current value of the firm based on the forecast period and the appraisal of
future opportunities. Nowadays it is quite problematic that these concepts regarding the
valuation methods used in practice are not homogeneous. In view of the major principles is
equal, but the details are different. In this paper my goal is to categorize the methods in the
right section and to demonstrate the characteristics, advantages and disadvantages as
well. This study proceeds as follow. The first section classifies and categorizes the different
valuation approaches, which are the ratios based on accounting data, the asset-based
approach, the income-based approach within the discounted cash flow models and the
value added methods, the relative valuation, at last the real options. The second part
presents the main features and implementation of the methods. Finally, the third section
concludes what might be learned from this study. Based on the related literature reviewed
and my previous researches I conclude that, in the evaluation, the problem is not that there
are not enough models to complete the task but on the contrary, the selection of the
appropriate model is the first challenge in the work. The different approaches lead to
significantly different values. The other main finding of this work that, professionals
involved in the assessment task explained the reason for the differences, and selection the
correct model which is the best fit for the job. Considering the models described below a
best model cannot be identified. This study also concludes that selecting the applicable
model depends on the current situation and characteristics of the company or assets.
Keywords: firm valuation; valuation models; discounted cash flow models; economic value
added