Earnings value

Earnings value (valeur de rendement) is an asset or company valuation method that capitalises or discounts normalised expected earnings at a rate reflecting the risk of the investment. It is one of the two components of the Swiss practitioners' method (alongside the asset-based value), and is computed as: Earnings Value = Normalised earnings / Capitalisation rate. In Swiss cantonal tax practice, it uses a standardised capitalisation rate published periodically by the cantonal tax authorities. Earnings value captures the income-generating capacity of the business rather than its asset base — making it particularly relevant for service businesses and asset-light companies.

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Example: a Swiss service company generates normalised annual earnings of CHF 800,000. Using a capitalisation rate of 8.0% (as published by the AFC for the relevant sector and risk profile), the earnings value is CHF 800,000 / 8.0% = CHF 10.0 million. Combined with an asset value of CHF 4.0 million in the Swiss practitioners' method (1/3 asset + 2/3 earnings), the total valuation is CHF 8.0 million.

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Hectelion applies earnings value methodology in Swiss fiscal valuations and succession planning, combining it with asset-based approaches per the practitioners' method.