There are two basic methods used for valuing a business:
Accounting Approach
Value is measured by earnings times P/E ratio. For a detailed discussion on this approach see
Valuation: Measuring and Managing the Value of Companies, Fourth Edition, University Edition
Discounted Cash Flow (DCF) Approach
This approach sums the future cash flows of the business and discounts them by a factor that is intended to reflect the risk of the business.
For detailed discussions see:
