Discussions

I always hear stories about 1 huge company buying out other companies for outrageous sums. I guess my question is how does one go about estimating value in a company. In laymans terms

Firstly, the value of assets. Land, building, inventory. Then there are the contacts such as suppliers, customer base, receivables, payables. Then there is what us called goodwill. That's the value of buying the use of the name if the business has been in business for a period of time and has a good reputation and the business wants to continue to do business under the current name. Goodwill can be the expensive part.

technically a company is worth the difference between its assets and its liabilities.  
 
However, a lot of companies will 'gamble' and pay more for a startup than the company is worth, thinking it has the next big idea.  
 
In fact, a company could be gobbled up by a Facebook or similar large tech firm, even if it is bleeding cash on its balance sheet.

Are often valued as how many shares they have outstanding multiplied by the current share price.

look at the yearly profit before taxes. suppose a ten year amortization for the company value and suppose a current ten year mortgage rate. the yearly profit should pay for that amortized amount. in other words you should be able to buy the company within ten years at todays yearly returns