Asset-Based Valuation

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What It Means

An Asset-Based Valuation is Business Valuation approach based on a company’s Net Asset Value (total assets minus total liabilities).

Why It’s Important

An Asset-Based Valuation is an important consideration in the sale of a business, and may be used in conjunction with other Business Valuation methods. Often, Net Asset Value may need to be adjusted during the valuation process to account for the fair market value of the assets. While this method may sound simple on the surface, calculating the fair value of intangible assets, such as trademarks, can be difficult. The Asset-Based Valuation method also ignores a company’s prospective future earnings. It is a useful tool, but considering these limitations it may work best in combination with other valuation methods for most businesses.

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