A method of valuing a business that recognizes that a buyer is purchasing the future income (earning) potential is the earnings approach.

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The earnings approach is a method of valuing a business based on its projected future earnings or income potential. It recognizes that a buyer is essentially purchasing the ability to generate income from the business over the long term. This approach takes into account factors like revenue, expenses, growth prospects, and other financial data to arrive at an estimated value for the business based on its expected future earnings.

A Method of Valuing a Business That Recognizes That a Buyer