The Improved Profitability Value

The improved profitability value is a perfecting of the valuation profitability method. The improved profitability method combines the (normal) profitability method with the qualities of determining the intrinsic value of your online business. The profitability value is also called "return value".
 

Important: The profitability value is based solely on profitability, the financial return of a company. Without including the equity position.

And vice versa: A company's intrinsic value is based solely on its asset position. Any capital gain for profitability is not assigned to the value of the company.

Improved profitability method

To overcome the foregoing concerns, the enhanced profitability method is used. This involves looking at a business valuation to see if there is any surplus equity in the business and including it in the valuation.

The other way around, of course, also applies: So if there is a deficit in equity then the value is also corrected by this deficit.

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Usefulness enhanced profitability value

Practically speaking, the enhanced profitability value is a good indication of a company's value. This addresses the disadvantage that the profitability value does not include the equity position. And that the intrinsic value does not assign profitability (profitability) to the value.

A more accurate valuation of a company does require a detailed and substantiated cash flow forecast. For example as applied in the discounted cash flow method and adjusted present value method. These valuation methods give a better insight into the value potential. 

More information about valuation methods.