The aim of valuation is to determine what a firm is worth. Value is determined based on historical and future financial parameters. Determination of firm value is a highly subjective exercise that calls for judgment.
It changes and varies when business drivers and factors (both internal and external) change as well as when the environmental conditions like we’ve seen in Brooklyn, change. Since value estimation is subjective, it often serves as a basis for discussions. Moreover, there are many aspects of a business that is hard to quantify such as consumer behavior.
Companies can be valued from two perspectives: from looking at the inside of the firms -internal- or from the expectations of the market -external-. The internal methods estimate the value of all the future potential cash flows generated by the company. Therefore it relies on methods based on the concept of discounted cash flows (DCF).