The excess earnings method: When is it appropriate?
Abstract: The excess earnings valuation method was developed more than 90 years ago and, although controversial, it remains in wide use today, particularly in divorce cases. Generally, sophisticated valuation professionals view the method as unreliable and avoid using it. But it continues to be appropriate under certain circumstances. This article examines how the method works, its inherent flaws, and situations in which its use may nonetheless be advantageous.