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Assessment Approaches: The Income Approach (I)

Author

Listed:
  • Elena Valentina ȚILICĂ

    (Bucharest University of Economic Studies)

  • Radu CIOBANU

    (Bucharest University of Economic Studies)

Abstract

According to the International Assessment Standards, in order to obtain a certain type of value, the three approaches of the unanimously acknowledged and applied value may be used, that are substantiated on the economic principles of substitution, variable proportions or benefits anticipation: the cost, market and income approach. In the article hereby we present aspects concerning the income approach, which consists of setting the value of the enterprise from the perspective of taking into consideration its capacity to generate profits/earnings for its future functioning. Financially, no investment has sense than by the cash flows likely to be achieved as a result of it. Thus, it is deemed that the amount of any invested capital must be estimated in terms of the earnings brought in the future.

Suggested Citation

  • Elena Valentina ȚILICĂ & Radu CIOBANU, 2023. "Assessment Approaches: The Income Approach (I)," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(5), pages 48-55, May.
    • Handle: RePEc:ahd:journl:v:4:y:2023:i:5:p:48-55
    DOI: 10.37945/cbr.2023.05.05
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    Keywords

    assessment; income approach; discount rate; future cash flows; updating the cash flow method; profit capitalization method; terminal value;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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