What is the Asset Approach to valuation?
The Asset Approach, sometimes called the cost approach, is based on the value of a company’s underlying assets and liabilities, and is generally an indication of the value that has accumulated over time. Generally speaking the cost of duplicating or replacing each component is determined individually, sometimes using specialist appraisers (e.g. real estate, machinery and equipment). Common asset-based methods are the a) Adjusted Book Value Method (sometimes augmented by the Excess Earnings Method to value intangibles); b) Liquidation Value Method; and c) Replacement Cost Method. This approach is most useful when a firm’s assets prove more valuable than values derived from the income and market approaches.
The Asset Approach, also called the cost approach, is based on the value of a company’s underlying assets and liabilities, and is generally an indication of the value that has accumulated over time. Generally speaking the cost of duplicating or replacing each component is determined, sometimes using specialist appraisers (e.g. real estate, machinery and equipment). Common asset-based methods are a) Adjusted Book Value Method (sometimes augmented by the Excess Earnings Method to value intangibles), b) Replacement Cost Method, and c) Liquidation Value Method. This approach is useful when a firm’s asset values are greater than values derived from income and market approaches.
