Page 208 - CFF

Asset approach

• The theory of the asset approach is that the value of

a firm is based on the sum of the values of its

individual assets.

• Typically used when valuing holding companies,

operating firms with little to no expected profitability,

or liquidating firms.

• Steps in asset approach

1. Identify all tangible, intangible, and redundant assets owned by the firm.

2. Value each asset using the income, market, or cost approach.

3. Calculate the total of the asset values and subtract liabilities.
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