Valuation Approaches and Methods (cont.)

Asset approach:

• Most appropriate for:
  - Asset holding companies, Family Limited Partnerships’s (FLP's)
  - Real estate entities
  - Marginally profitable businesses
  - Purchase accounting
  
  
• Business is worth more dead than alive
  
  
• Method does not address the future earnings capability of the company
  
  
• Balance sheet approach: as of a certain point in time
   
• Adjust assets and liabilities to fair market value from historical cost
  
  
• Net Asset Value = Assets - Liabilities = "Equity"