Asset-based valuation approach that determines business value by adjusting balance sheet assets and liabilities to fair market value. Most appropriate for asset-heavy businesses or liquidation scenarios.
The adjusted net asset method values a business based on the fair market value of its net assets
Business Value =
Fair Market Value of Assets
minus
Fair Market Value of Liabilities
Systematic approach to adjusting balance sheet items to fair market value
Appropriate application scenarios for adjusted net asset valuation
Companies with significant tangible assets relative to earnings
Examples: Real estate companies, manufacturing, equipment rental
When business operations are being discontinued
Examples: Distressed sales, business closures, asset disposition
Investment vehicles primarily holding other assets
Examples: Real estate holding companies, investment portfolios
Companies with minimal operating history
Examples: New businesses with significant asset base but limited earnings
Get professional guidance on adjusted net asset valuations and asset-based business appraisal approaches