What are the assets worth, less the liabilities, if each were restated to market value?
The asset approach values a business as the sum of its assets less its liabilities, with each item restated from book value to market or realisable value. It leads for asset-heavy or thin-margin businesses and holding entities, and it sets the floor in every other valuation.
Each asset and liability is restated from book value to market value: property, plant and equipment, inventory, debtors, contingent liabilities and the tax effect of unrealised gains. Book value against market value is the whole point, because a fully depreciated machine still has a price.
Tangible assets are valued, then the earnings above a fair return on those assets are capitalised to estimate goodwill. It bridges asset and income thinking, and it is used sparingly and with its limits explained.
A going concern should be worth at least the net realisable value of what it owns. That makes the asset result the floor in every engagement, not only in the industries where it leads. Where an earnings-based conclusion falls below the adjusted net asset value, that is itself a finding worth stating plainly, because it usually means the business is not earning an adequate return on the assets tied up in it.
Where plant is material, an independent plant and machinery valuation supports the restated figures rather than the valuer estimating them. Equipment finance, chattel mortgages and any residual or balloon amounts are then deducted in full when moving from enterprise value to equity value.
Asset-heavy or thin-margin businesses: manufacturing and fabrication, transport and logistics, construction and civil contracting with heavy plant, along with property or investment holding entities, businesses being wound up, and as the floor in any valuation.
A defensible valuation considers all three approaches, applies the ones that fit, and explains why the others were given little or no weight. A detailed report sets that reconciliation out in full.