Asset valuation is used with asset-intensive companies. Retail businesses and manufacturing companies fall into this category. This process takes into account the following figures, the sum of which determines the market value:
Fair market value of fixed assets and equipment (FMV/FA) – This is the price you would pay on the open market to purchase the assets or equipment.
Leasehold improvements (LI) – These are the changes to the physical plant that would be considered part of the property if you were to sell it or not renew a lease.
Owner benefit (OB) – This is the seller’s discretionary cash for one year; you can get this from the adjusted income statement.
Inventory (I) – Wholesale value of inventory, including raw materials, work-in-progress, and finished goods or products.