Which valuation technique primarily looks at expected cash flows from operations?

The income-based approach is primarily focused on assessing the expected cash flows generated from a company’s operations. This valuation technique emphasizes the future financial performance of the business, specifically by estimating the cash flows that the business is likely to produce over a certain period. By discounting these projected cash flows back to their present value, analysts can derive the intrinsic value of the company.

This approach is particularly advantageous in scenarios where companies do not pay dividends, or where the primary concern is the operational efficiency and profitability rather than asset liquidation or market comparisons. By concentrating on cash flows, the income-based approach captures the ongoing operational success of the company and reflects its ability to generate profits going forward. This provides a robust framework for understanding the actual economic benefits an investor can expect from owning the business.

In contrast, the other approaches either focus on market prices, the valuation of physical assets, or dividend payments, which do not directly correspond to operational cash flows in the same way.