The Adjusted Net Asset Valuation Method – Connecting the dots between Theory and Practice

The valuation of an entity is an intricate process leading to the establishment of its marketvalue. A company’s value is created, on one hand, by its assets and liabilities and, on the otherhand, by its capacity to generate future economic benefits. In order to evaluate the equity of acompany a bala...

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Bibliographic Details
Published in:"Ovidius" University Annals. Economic Sciences Series (Online) 2016-01, Vol.XVI (1), p.521-526
Main Authors: Silvia Ghiță-Mitrescu, Cristina Duhnea
Format: Article
Language:English
Subjects:
adjusted net assets method
balance sheet
book value
market value
Online Access:Get full text
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Summary:The valuation of an entity is an intricate process leading to the establishment of its marketvalue. A company’s value is created, on one hand, by its assets and liabilities and, on the otherhand, by its capacity to generate future economic benefits. In order to evaluate the equity of acompany a balance sheet-based valuation method is used, most commonly the adjusted net assetsvaluation method. The goal of this paper is to present the theoretical background of this method as well as itspractical application. We will first analyze the main theoretical issues regarding the correctionsthat need to be performed in order to transform the book value of assets and liabilities to theirmarket value, afterwards proceeding to an example on how this method is applied to the balancesheet of a company. Finally, we will conclude on the importance of the method for a company’sevaluation process.
ISSN:2393-3127
2393-3127