Asset Valuation

Asset valuation is used when a company is asset-intensive. Retail businesses and manufacturing companies fall into this category. This process takes into account the following figures, the sum of which determines the market value:

Fair market value of fixed assets and equipment (FMV/FA) - This is the price you would pay on the open market to purchase the assets or equipment.

Leasehold improvements (LI) - These are the changes to the physical plant that would be considered part of the property if you were to sell it or not renew a lease.

Owner benefit (OB) - This is the seller's discretionary cash for one year; you can get this from the adjusted income statement.

Inventory (I) - Wholesale value of inventory, including raw materials, work-in-progress, and finished goods or products.