Asset Approach

The asset approach to business valuation values a company by adjusting its assets and liabilities to fair market value and the difference represents the "net asset value" of the company. The procedure is to adjust each asset and liability item on the balance sheet to its fair market value. Any assets or liabilities not on the balance sheet should also be valued and brought onto the balance sheet. This approach is usually not applicable to a profitable going concern because in that case the value lies largely in the earning power of the business. This approach is also usually not used when valuing a minority interest because the minority owner does not have the ability to liquidate the assets of the business.