6. Asset-Based Valuation
j. describe asset-based valuation models and their use in estimating equity value;
k. explain advantages and disadvantages of each category of valuation model.
What is the theory underlying the asset-based valuation approach?
The value of a business is equal to the sum of the value of the business's assets. The approach estimates the intrinsic value of a common share from the estimated value of assets of a corporation minus the estimated value of its liabilities and preferred shares.