Entrepreneurship questions Assignment Example | Topics and Well Written Essays - 250 words

Entrepreneurship questions - Assignment Example This discussion shall focus on the earning based approach together with its strengths and weaknesses. Moreover it will focus on factors that may affect franchising over the next ten years. This mode of business valuation is based on the concept of predicting the probability of a business to make profits and more wealth in future. In this case, the valuator may undertake various forms of calculation majorly based on determining future income cash flows by using a company’s records indicating past earnings as well as other records indicating general information of past performance. This is specifically done by creating a normalcy of expected revenue and the multiplying it with a specific capitalization factor. One of the strengths of the earning-based approach is the fact that it involves the use of simple computing methods such as the Price Multiple Earnings. Moreover, this method has been considered relatively more accurate as compared to other methods like asset based approach. One the other hand, it is quite challenging to attain 100% accuracy with this method making its greatest weakness. Increasing business competition is one imperative factor that will affect franchising over the next ten years. This is due to the fact majority of upcoming businesses are exposed to high rates of competition with already established businesses thus compelling them to use business models of these already established businesses. Moreover, varying economic factors i.e. fluctuation of prices that majorly affects new small scale businesses may affect franchising over the next decade; this may compel such enterprises to franchise with already established and financially stable businesses. "EARNINGS VERSUS CASH BASED VALUATION TECHNIQUES." EARNINGS VERSUS CASH BASED VALUATION TECHNIQUES. N.p., n.d. Web. 17 Feb. 2014.