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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.