The process of determining the current worth of a financial asset or investment. This can be based on market prices, earnings projections, or other methodologies.
The process of translating future cash uncertainty into a present number that markets or auditors will accept. For liquid instruments the exercise starts and ends with quoted bids; for the illiquid crowd, practitioners wheel out discounted cash-flow lattices, option-adjusted spread models, precedent-transaction multiples, or appraisal comparables. Each method demands its own thermostat: discount rates bend to capital-structure tweaks, terminal values pivot on secular growth curves, and control premiums adjust when voting rights change hands.
Independent price challenges, back-testing against exit proceeds, and sensitivity grids that twist key assumptions by a standard deviation all protect against model complacency. A living valuation policy codifies frequency, hierarchy, and review thresholds so stakeholders know exactly how often numbers face the interrogation lamp.
