Abstract: This paper starts with maximization of value as the judgment principle in financial decisions, and discusses the choice of corporate valuation models under the present background of financial decision-making in China. It is found that the discounted cash flow approach is the most realistic and applicable choice for present in China. Based on the discussion above, the paper analyzes the three problems met with in the application of discounted cash flow approach.

Key words: financial decision, corporate valuation, discounted cash flow approach, residual income valuation