Asset based valuation

In this lesson

1. 0:00 Asset-based valuations introduction
2. 0:31 When asset valuations are relevant
3. 1:56 How to calculate asset valuations
4. 3:04 Net realisable value and replacement cost
5. 4:36 Worked example: David Coe calculation
6. 6:35 Strengths and weaknesses of the approach
7. 8:56 Summary and key takeaways

About this lesson

You'll discover why net book value is irrelevant and how to use net realisable value and replacement cost instead. The calculation itself is straightforward: take total assets, deduct all liabilities, and adjust for any differences between book values and current market values. The key is using up-to-date market values rather than historic cost figures, ensuring your valuation reflects what assets are genuinely worth today. We'll work through a practical example to show you how to build this calculation step by step. Asset-based valuation has real strengths: the information is relatively accessible, it's easy to explain to non-accountants, and it provides a solid floor for negotiations. However, it has significant limitations. It ignores future profitability, which means it massively undervalues going concerns, and it often misses intangible assets like brands that don't appear on the statement of financial position. Understanding both sides of this technique will help you know when to use it and when to combine it with other valuation methods.

Duration: 10m