Business evaluation is the systematic process of analyzing and assessing the performance of an entity, whether it is a company, organization, or project, about specific previously established objectives. This analysis can be performed at any stage of the business life cycle and covers financial, operational, and strategic aspects.

The economic and financial value of the company minimizes uncertainty and provides a firm basis for shareholders in decision-making. This value must be taken as a basis to adequately determine the profitability and goals demanded by shareholders when it is necessary to sell, buy, merge, co-invest, associate, bypass bypass, divest, or spin off an organization. Entrepreneurs and senior executives must always know, with complete certainty, their companies' economic and financial value.

1.The main purposes of the evaluation:

The process begins with data collection through surveys, interviews, observations, and other analytical tools. This data is then analyzed to identify critical success factors and areas for improvement and offer concrete recommendations.

2.Benefits of Business Assessment

Facilitation in decision-making: It provides a solid basis for deciding whether to continue, expand, or redirect a business.

3.Specific evaluations

4.Process in Business Evaluation

The business assessment process typically includes the following stages:

5.Tools for Business Assessment

6.Challenges of Business Assessment

Despite its benefits, business assessment presents several challenges:

Overcoming these challenges requires meticulous planning and robust tools and methodologies.

7.Considerations for Choosing an Evaluation Method

When selecting an evaluation method, several factors must be taken into account:

8.Theories and Approaches That Underpin the Determination of the Value of Companies

Business assessment is based on various approaches and theories that help determine a company's intrinsic and market value. These theories provide the conceptual and methodological basis for accurate and well-founded assessments. The main theories and approaches are described below:

8.1. Discounted Cash Flow (DCF) Approach. DCF is one of the most widely used methods in business valuation and is based on the following economic theories:

This approach assesses the company's ability to generate cash flows in the future and adjusts them to present value by considering risks and the cost of capital. Its importance lies in its ability to synthesize profitability in a single number, simplifying analysis by optimizing financial resource allocation and facilitating organizational decision-making.

8.2.Peer Valuation Approach. Theory of Market Efficiency, (^{Fama, 1970}).

This approach determines the value of a company by comparing it to similar companies operating in the same sector or industry. Key metrics such as:

This methodology assumes that markets are rational and that the valuations of comparable companies reflect fair prices.

8.3.Asset Focus or Substantive Value

This approach is based on the Book Value Theory and evaluates the company by considering the net value of its assets, i.e., the difference between total assets and liabilities. It has two main variants:

The theory brought from economics is adapted and developed in accounting practice. The authors of this theory can be grouped and organized into different lines of thought that reflect the affinity of the theory of value for its accounting approaches. The authors ^{Mattessich (2002)}, ^{Buys (2009)}, and ^{Sánchez and Arias (2012)} can be classified as supporters of the theories of use value and exchange value. Toms and ^{Bowman (2008)}, ^{Bryer (2014)}, and ^{Sadowska and Lulek (2016)} are more in line with the labor theory of value. Finally, the author ^{Dueñas (2007)} can be classified as a critic of the subjective theory of value and affirms that this theory is bilateral to accounting practice.

8.4.Market Value Approach

It is based on the Theory of Supply and Demand (^{Smith, 1776}), which states that a firm's value is the price buyers are willing to pay under free market conditions. This approach is commonly used for public companies listed on stock exchanges (^{Hurtado, 2003}).

8.5.Real Options Approach

Based on Financial Options Theory, this approach recognizes that the company has future opportunities that can be seen as "options." These include:

The value of these real options is calculated using methods such as the Black-Scholes model or Monte Carlo simulations. (^{Black & Scholes, 1973}).

Options theory allows the assessment of strategic opportunities. The quantitative analysis of options, together with the qualitative and strategic analysis of company policy, allows correct and rational decisions to be made about the company's future.

8.6.Agency Theory-Based Approach

The Theory of Agency (^{Jensen, 1986}; Jensen & Meckling,1976) analyzes the relationship between owners (shareholders) and managers. According to this theory, valuation decisions should consider how conflicts of interest influence company management and performance.

8.7.Value Creation Approach (EVA and MVA)

8.8.Risk and Return Approach

Based on Portfolio Theory (^{Sharpe, 1964}) and the Capital Asset Valuation Model (CAPM), Harry ^{Markowitz (1952)}, ^{William F. Sharpe (1964)}, John ^{Lintner (1965)}, and Jan ^{Mossin (1966)} developed the CAPM method, this approach considers:

8.9.Stakeholder Theory Approach

This approach considers that the value of a company is not only determined by its financial performance but also by the impact on its stakeholders (customers, employees, communities, and the environment), proposed by Freeman (1984) and presented in more detail by ^{Fontaine, Haarman, and Schmid (2006)}. This approach integrates:

Economic and financial indicators are valuable tools that benefit organizations by facilitating timely and appropriate decision-making about their corporate and financial strategies.

Next, the evolution of some economic and financial indicators of the Mexican environment is described and shown to facilitate decision-making related to personal and business strategies in an integral manner.