Fundamental Glossary / Valuation Methods
Asset-Based Valuation
Valuing the company from its assets minus its liabilities, adjusted from book value toward a current economic value.
Formula
Fair value of assets - fair value of liabilities = equity value. Liquidation value uses fire-sale prices. Going-concern asset value uses replacement or earning-asset values.
What it means
Asset-based valuation fits banks, insurers, holding companies, and property vehicles, and it fits a firm that may be worth more dead than alive.
For an operating company with a valuable franchise, the assets on the balance sheet miss the going-concern value. Asset value is then a floor, not the full answer.
How to read it
A market price below a conservative liquidation value is the deepest margin-of-safety case, and it is rare. Check that the assets can actually be sold for the values you used.
What to watch
Goodwill, deferred-tax assets, and specialised plant often realise little in a liquidation. Subtract them before you call book value a floor.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.