what is asset valuation 
asset valuation is the process of determining the fair market or present value of assets using book values absolute valuation models like discounted cash flow analysis option pricing models or comparables such assets include investments in marketable securities such as stocks bonds and options tangible assets like buildings and equipment or intangible assets such as brands patents and trademarks understanding asset valuationasset valuation plays a key role in finance and often consists of both subjective and objective measurements the value of a company s fixed assets also known as capital assets or property plant and equipment is straightforward to value based on their book values and replacement costs corporations use asset valuation when they apply for loans and banks review it during their credit analysis however there s no number on the financial statements that tell investors exactly how much a company s brand and intellectual property are worth companies can overvalue goodwill in an acquisition as the valuation of intangible assets is subjective and can be difficult to measure net asset valuethe net asset value also known as net tangible assets is the book value of tangible assets on the balance sheet their historical cost minus the accumulated depreciation less intangible assets and liabilities or the money that would be left over if the company was liquidated this is the minimum a company is worth and can provide a useful floor for a company s asset value because it excludes intangible assets a stock would be considered undervalued if its market value were below book value which means the stock is trading at a deep discount to book value per share however the market value for an asset is likely to differ significantly from book value or shareholders equity which is based on historical cost and some companies greatest value is in their intangible assets like the findings of a biomedical research company absolute valuation methodsabsolute value models value assets based only on the characteristics of that asset these models are known as discounted cash flow dcf models and value assets like stocks bonds and real estate based on their future cash flows and the opportunity cost of capital they include relative valuation comparable transactionsrelative valuation models determine the value based on the observation of market prices of similar assets for example one way of determining the value of a property is to compare it with similar properties in the same area likewise investors use the price multiples comparable public companies trade at to get an idea of relative market valuations stocks are often valued based on comparable valuation metrics such as the price to earnings ratio p e ratio price to book ratio or the price to cash flow ratio this method is also used to value illiquid assets like private companies with no market price venture capitalists refer to valuing a company s stock before it goes public as pre money valuation by looking at the amounts paid for similar companies in past transactions investors get an indication of an unlisted company s potential value this is called precedent transaction analysis real world example of asset valuationlet s work out net asset value for alphabet inc goog the parent company of search engine and advertising giant google all figures are for the period ending dec 31 2018 total net asset value 175 4 billion total assets 232 8 billion total intangible assets 2 2 billion total liabilities 55 2 billion 