Saturday, 29 April 2017

Asset-Based Valuation

Asset-Based Valuation uses market values of a company's assets and liabilities to determine the value of the company as a whole.

Asset based valuation works well for:

  • Companies that do not have a significant number of intangible or "off-the-book" assets, and have a higher proportion of current assets and liabilities.
  • Private companies, especially if applied together with multiplier models.
  • Financial companies, natural resource companies and companies that are been liquidated.

Asset-based valuation may not be appropriate when:

  • Market values of assets and liabilities cannot be easily determined.
  • The company has a significant amount of intangible assets.
  • Asset values are difficult to determine (e.g., in periods of very high inflation).
  • Market values of assets and liabilities significantly differ from their carrying values.

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