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.