Valuation Method Examples

1. Prepare a reconstructed balance sheet showing the reported assets and liabilities.
2. Add any assets needed to operate the business, but not shown on the reported balance sheet.
3. Adjust the balance sheet to reflect Non-Operating Assets and Liabilities.
4. Determine the market value of the tangible assets and liabilities to be included in a sale. Sources of this information can be found be contacting used equipment dealers and/or auctioneers.

This method is best used for real estate holding companies or asset heavy companies with earnings that do not support a value higher than the tangible assets. The latter may indicate that the company may only be worth the liquidation value of its tangible assets. This method is often used even with profitable companies to represent the low end of the range of indications of value, and sets the hurdle that valuation methods based on earnings must overcome to show proof of goodwill value."