Surplus Approach

The Surplus Approach views a firm's value based on its ability to generate and retain surplus, which is the profit remaining after covering all costs, including investments needed for growth. This surplus reflects the company's earning power and efficiency. Investors and analysts use it to assess a company's performance, growth potential, and stability. Essentially, it focuses on the firm's capacity to produce value beyond just breaking even, emphasizing sustainable profitability and the capacity to reinvest in the business for future success.