Question 1

What is valuation, and why is it important?

Accepted Answer

Valuation is the process used to determine how much a business or any other asset is worth. Valuing companies is important because, in corporate finance as in our daily lives, you never want to pay more for something than it’s worth. Fair market value (FMV) thus determines the structure of a mergers and acquisitions (M&A) deal, pricing of shares of a company in an initial public offering, or how much equity in a startup is worth.

Because accurate valuation requires projecting future income generated by the company or asset in question, however, this process can be challenging and unavoidably involves uncertainty. It is particularly difficult when attempting to determine the value of a startup, which by definition lacks the track record of financial statements of more established companies.

Traditional methods of valuing companies use classic discounted cash flow analysis to build a simple model of future revenues and determine their present value based on the time value of money. More sophisticated valuation methodologies use statistical techniques such as linear regression analysis and/or simulations using the Monte Carlo method to better incorporate sources of risk and uncertainty.

Question 2

What kinds of careers can I have with skills in valuation?

Accepted Answer

Any CFO or CEO of a company needs a basic knowledge of the principles of valuation in order to understand what their company is worth. This background is essential to making decisions between different corporate financing strategies, such as taking on debt versus selling equity shares, going public, or being acquired. A strong understanding of valuation is especially critical for startup founders, who must be able to negotiate with potential angel investors or venture capital funds over the likely future worth of a company that may not yet have any sales.

Careers in finance require more than a familiarity with the principles of valuation - they require expertise. Valuing companies and assets is a central responsibility of the financial analysts employed by investment banks, private equity firms, hedge funds, and other financial institutions, where millions or even billions of dollars can be at stake depending on the accuracy of a valuation. As such, these experts often have masters of business administration (MBA) degrees, and are highly compensated; according to the Bureau of Labor Statistics, analysts in securities and other financial investment activities received a median salary of $101,410 in 2018.

Question 3

Can I learn about valuation methodologies by taking online courses on Coursera?

Accepted Answer

Certainly. Coursera offers courses and Specializations covering the basics of valuation as well as more advanced techniques, as well as courses geared towards the specific context of startup valuations. These courses are offered by top-ranked universities and business schools, including the University of Pennsylvania, Duke University, and the University of Michigan, and provide the same learning experience as on-campus students at a significantly lower cost. You don’t need to be an expert in valuation (yet) to understand that that combination is quite a compelling value proposition.

Question 4

What skills or experience do I need to already have, before starting to learn valuation?

Accepted Answer

To learn valuation, your skills and experience would likely include a sense of business operations knowledge, good accounting and financial acumen, and possibly a four-year college or university degree in finance, accounting, or business administration. Having solid work experience on a company financial team can also help you understand business valuation more clearly. Valuation for companies and organizations generally includes finding the value of the founder’s ownership prior to starting the business and after subsequent funding. In using valuation techniques to determine the financial health and status of a company, you may need to learn to read financial statements and be clear on cash flows, income statements, and the time value of cash. All of these skills and experience would be useful to already have before starting to learn valuation.

Question 5

What kinds of people are best suited for roles in valuation?

Accepted Answer

The kinds of people best suited for roles in valuation are numbered-focused persons who can help companies understand the clear value of their business. Doing valuation requires someone who is sharp with details, has strategic and analytical understanding of businesses, knows how they operate, what partnership opportunities may exist, and is able to see the long-term outlook. People who work in valuation may have a convincing personality, with the skill to show senior business executives the true value of their business.

Question 6

How do I know if learning valuation is right for me?

Accepted Answer

You may find that learning valuation is right for you if you are a person who likes to dig into the financial details of a company, while also being able to step back and see a bigger long-term picture for the company. This takes a certain analytical skillset, as well as having a professional demeanor, with good communications skills. You would need to be comfortable with financial software tools and be able to create presentations to display to business teams on your valuation work. Learning the fundamentals of valuation will give you a clear understanding of a company’s financial status, its ability to attract funding, and if there may be strategic partners to fold operations within to make the business even stronger. If you want to know the basics of company financial operations, then learning valuation might be a good step forward in your career.

Question 7

What are the benefits of taking an online Valuation course?

Accepted Answer

Online Valuation courses offer a convenient and flexible way to enhance your knowledge or learn new Valuation skills. Choose from a wide range of Valuation courses offered by top universities and industry leaders tailored to various skill levels.

Question 8

What Valuation courses are best for training and upskilling employees or the workforce?

Accepted Answer

When looking to enhance your workforce's skills in Valuation, it's crucial to select a course that aligns with their current abilities and learning objectives. Our Skills Dashboard is an invaluable tool for identifying skill gaps and choosing the most appropriate course for effective upskilling. For a comprehensive understanding of how our courses can benefit your employees, explore the enterprise solutions we offer. Discover more about our tailored programs at Coursera for Business here.

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Explore the Valuation Course Catalog

Discounted Cash Flow Modeling

Advanced Valuation and Strategy - M&A, Private Equity, and Venture Capital

Stock Valuation with Dividend Discount Model

Startup Valuation Methods

Valuation and Financial Analysis For Startups

Investment Banking: Financial Analysis and Valuation

Profit Analysis using Economic Value Added

Business and Financial Modeling

Finance of Mergers and Acquisitions: Valuation and Pricing

Mergers and Acquisitions

Investment Risk Management

Private Equity and Venture Capital

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Frequently Asked Questions about Valuation

What is valuation, and why is it important?‎

What kinds of careers can I have with skills in valuation?‎

Can I learn about valuation methodologies by taking online courses on Coursera?‎

What skills or experience do I need to already have, before starting to learn valuation?‎

What kinds of people are best suited for roles in valuation?‎

How do I know if learning valuation is right for me?‎

What are the benefits of taking an online Valuation course?‎

What Valuation courses are best for training and upskilling employees or the workforce?‎

Other topics to explore