# Asset based valuation

Asset-Based Valuation is a straightforward approach where the value of a business is estimated based on the value of its assets after deducting liabilities. This method involves calculating the current value of all tangible assets (like equipment, inventory, and real estate) and intangible assets (such as patents, trademarks, and goodwill). Liabilities are then subtracted from the total value of these assets to determine the net asset value of the company. This valuation method is particularly useful for companies with significant physical assets or for situations like liquidation analysis. However, it may not capture the true value of companies with significant intangible assets or high earning potential. This method gives a clear picture of what a company is worth if it were to be liquidated and is a useful tool for assessing the minimum value of a company.

## Asset based valuation

Let's explore an example of Asset-Based Valuation through a hypothetical scenario involving two companies, Company X and Company Y, both in the manufacturing sector.

Company X has a large factory, state-of-the-art manufacturing equipment, and owns several patents critical to its production processes. When applying Asset-Based Valuation, we start by assessing the current market value of its tangible assets, such as the factory and equipment. Let's say these are valued at \$5 million. Next, we estimate the value of its intangible assets like patents, which might be valued at \$2 million due to their importance in the industry.

On the liabilities side, Company X has loans and other obligations totaling \$3 million. To find the net asset value, we subtract the liabilities from the total assets: (\$5 million + \$2 million) - \$3 million = \$4 million. Thus, the Asset-Based Valuation of Company X would be \$4 million.

Company Y, on the other hand, operates in the same sector but has a different asset structure. It leases its factory and equipment, so its tangible assets are limited. However, it has developed a strong brand and has several lucrative licensing agreements, which are its main intangible assets. If these intangible assets are valued at \$3 million and its liabilities are \$1 million, the net asset value of Company Y would be \$3 million - \$1 million = \$2 million.

This example demonstrates how the Asset-Based Valuation method works by focusing on the net value of a company's assets after liabilities are accounted for. It highlights the method's utility in providing a ""liquidation value"" or a baseline value for a company, emphasizing tangible assets' importance. However, it also points out the method's limitations, such as potentially undervaluing companies like Company Y, which might have significant intangible assets or future earning potential not fully captured by this valuation approach."

### Mission Statement

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### Vision Statement

A vision statement is a forward-looking declaration that outlines an organization's future goals and aspirations, providing a clear and inspirational long-term direction. It is important because it serves as a motivational guide, influencing decision-making and shaping the strategic planning of the organization.

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Business Phases refer to the distinct stages of development and growth that a business undergoes, from inception to maturity.

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Business Stakeholders are individuals, groups, or organizations with a direct or indirect interest in the business and can affect or be affected by its activities.

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Pain points refer to specific problems that prospective customers of your business are experiencing.

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### SWOT Analysis

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### Porter's Five Forces

Porter's Five Forces is a framework for analyzing a business's competitive environment and identifying the level of competition within an industry.

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### VRIO Analysis

VRIO Analysis is a strategic tool used to evaluate an organization's resources and capabilities to discover competitive advantages.

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### PESTEL Analysis

PESTEL Analysis is a strategic tool used to analyze the macro-environmental factors that can influence an organization's operations and performance.

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### Strategy Canvas

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### Allocation of Funds

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Competitive advantage refers to the attributes that allow an organization to outperform its competitors.

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### Marketing Strategy

Marketing Strategy is a comprehensive plan formulated to achieve specific marketing goals and objectives.

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### Target Market

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### Competitive Analysis

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### Market Overview

A Market Overview provides a comprehensive analysis of the industry and market in which your business operates, including size, growth, trends, and key players.

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### Target Audience

Target Users are the specific group of individuals or organizations that a business aims to serve with its products or services.

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### Market Size & Business Potential

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### Product Pricing

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### Organizational Structure

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### Founder Team

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General Tasks are the various activities and responsibilities undertaken by a business to achieve its operational and strategic goals.

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Marketing Tasks are specific activities and initiatives undertaken to promote a business’s products or services, enhance brand visibility, and drive sales.

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Business Phase Tasks in a business plan outline the specific activities and objectives to be accomplished during each distinct phase of the business’s development and growth.

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### Operational Risks

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### Regulatory Risks

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### Strategic Risks

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### Finance Risks

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Other Risks encompass various potential threats that do not fall under the typical categories of operational, financial, strategic, or regulatory risks but can still impact a business significantly.

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### Revenue Formation Narrative

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### Revenue Calculations

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### COGS Formation Narrative

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### Cost of Goods Sold (COGS) - Meaning & Calculation

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### SG&A Personnel Expenses

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### SG&A Other Expenses

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An Income Statement, also known as a Profit and Loss Statement, is a financial report that shows a company's revenues, expenses, and profits or losses over a specific period.

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### Balance Sheet - Financial Statement

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### Cash flow Sheet Statement

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### Estimation of Cost of Capital

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### Cost of Capital Methodology

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### DCF

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### Multiple based valuation

Multiple-Based Valuation is a method of valuing a company by applying industry-specific valuation multiples to a financial performance metric of the business.

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