Review of the Importance of Technology Company Valuation and Commonly Used Methods

Abstract

With the rapid development of technology companies around the world, the industrial system based on technology development now has more development space than ever before. Studying the development of new technology, as well as the value evaluation of technology firms, is essential for investing in technology-related industries. This paper analyzes existing problems when using each evaluation method for technology valuation. It can be concluded that absolute and market-based valuation is often not suitable for the valuation of technology companies. The qualitative methods that require inputs from industry experts are very subjective. The real option valuation method provides a more realistic (and greater) value of technology, since it allows managers to evaluate future development and upgrade value. When selecting the appropriate valuation model for technology company, it must be understood that the industry background in which the company operates and analyze the applicability of each method.