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    Module 2.1 - Asset Valuation

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    Gerald Ramilo
    Asset valuation is a process of determining the fair market value or present value of assets using various methods. It allows calculating a business's net worth by adding the current value of assets and subtracting liabilities. There are several ways to value different types of assets, whether tangible like buildings, equipment, or intangible like brands and patents. Asset valuation is important for determining the right price when assets are bought or sold, calculating accurate taxes, evaluating mergers and acquisitions, securing loans using assets as collateral, and validating financial audits and reports.

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    Module 2.1 - Asset Valuation

    Uploaded by

    Gerald Ramilo
    5 views8 pages
    Asset valuation is a process of determining the fair market value or present value of assets using various methods. It allows calculating a business's net worth by adding the current value of assets and subtracting liabilities. There are several ways to value different types of assets, whether tangible like buildings, equipment, or intangible like brands and patents. Asset valuation is important for determining the right price when assets are bought or sold, calculating accurate taxes, evaluating mergers and acquisitions, securing loans using assets as collateral, and validating financial audits and reports.

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    ASSET VALUATION

    Original Title

    MODULE 2.1- ASSET VALUATION

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    Asset valuation is a process of determining the fair market value or present value of assets using various methods. It allows calculating a business's net worth by adding the current value of assets and subtracting liabilities. There are several ways to value different types of assets, whether tangible like buildings, equipment, or intangible like brands and patents. Asset valuation is important for determining the right price when assets are bought or sold, calculating accurate taxes, evaluating mergers and acquisitions, securing loans using assets as collateral, and validating financial audits and reports.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    5 views8 pages

    Module 2.1 - Asset Valuation

    Uploaded by

    Gerald Ramilo
    Asset valuation is a process of determining the fair market value or present value of assets using various methods. It allows calculating a business's net worth by adding the current value of assets and subtracting liabilities. There are several ways to value different types of assets, whether tangible like buildings, equipment, or intangible like brands and patents. Asset valuation is important for determining the right price when assets are bought or sold, calculating accurate taxes, evaluating mergers and acquisitions, securing loans using assets as collateral, and validating financial audits and reports.

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    ASSET-BASED

    VALUATION
    METHOD
    Asset Valuation
    ● It is a process of determining the fair market value or present value of assets, using book
    value, absolute valuation models like discounted flow analysis, option pricing model, or
    comparable. Such assets include investments in marketable securities such as stocks,
    bonds, and options: tangible assets like building and equipment or intangible assets such
    as brands, patents, and trademarks.

    Asset-Based Valuation
    ● It allows to calculate a business’s net worth by adding up the current value of its assets
    less the value of its liabilities.
    How to Value the Business Assets?
    ● Tangible Assets- determining the value of tangible assets is the net book value, which is the
    value of the assets stated in the accounts. It can adjust the net book value figures to take into
    account economic factors such as;
    - Property or other fixed assets which have changed in value
    - Bad debt to the business
    - Old assets or stock which would have to be sold at a discount

    The value of fixed assets can be determined using this method:


    - Cost Method- the value of the assets is based on the price at which it was brought.
    - Market Value Method- the value of the assets is based on its market price or projected price
    when sold in the open market
    -Replacement Value
    -Net Realizable Value
    How to Value the Business Assets?
    ● Intangible Assets- a common way of valuing intangible assets,
    excluding goodwill:
    - Market Approach- the value of assets based on the price which is
    brought.
    - Cost Approach- based on estimating the cost of constructing or
    acquiring a new intangible asset that is more or less the same use as the
    existing one.
    - Income Approach- assumes the value of an asset in the present value
    of future earning from the asset.
    Importance of Asset Valuation
    Asset Valuation is one of the most important things that need to be done by companies and organizations. There
    are many reasons for valuing assets:
    1. Right Price- asset valuation helps to identify the right price for assets, especially when it is offered to be
    brought or sold. And also, it is beneficial to both buyer and seller because the former won’t need to pay
    more than the asset value nor will be latter paid less than the asset value.
    2. Taxes- the organization that owns property or other assets need to pay taxes on their assets by doing asset
    valuation taxes are computed accurately.
    3. Company Merger- in the event that the two companies are merging or if the company is to be taken over,
    asset valuation is important because it helps both parties size up the business.
    4. Loan Application- when the company applies for a loan, the bank or the financial institution may require
    collateral protection against possible debt default. Asset Valuation is needed then for the lender is to
    determine the loan amount that can be covered by the company offering its assets as collateral.
    Importance of Asset Valuation
    5. Audit- companies, especially public ones, are regulated, which means they need to present financial
    audits and reports for transparency. Part of the audit process involves verifying the value of the assets.
    How Asset Valuation Works in Favor of Financial Statement

    `1. Accurate Financial Reporting- this valuation helps keep the value of assets stated in the financial
    statement. Assets never have the same value from the day they were first purchased. A percentage has
    to be deducted from their value for depreciation, part of a process we call asset valuation.

    2. Valuation Save Time- the existing rules and regulations in submitting financial reports to the
    Bureau of Internal Revenue and the Securities and Exchange Commission, delays are evident in
    the financial reporting scene. Valuation saves time, money, and effort for your company as it helps
    to avoid misstatements of asset value in reports and its corresponding penalties, thus making
    Financial Reporting as efficient as it could ever be.
    How Asset Valuation Works in Favor of Financial Statement

    3. Valuation Validates Data- there are certain regulations that you would have to observe to establish
    the authenticity of your report.

    4. Avoid Tax Overpay- Corporate tax rates are quite high. When companies make a lot of profit, the
    taxes they would have to pay will be relatively high. Usually, business owners get surprised at
    how little they have left once they have paid taxes to the government.

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