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Learn About Asset Valuation and How It Works

By January 12, 2022June 17th, 2024Blog9 min read
Asset Valuation

A company’s value can be calculated depending on various factors such as its employees, products, physical property owned, physical inventory, automobiles etc. Asset valuation helps business owners to know the actual value of their company and to have an idea of whether they’re able to repay their debts with that value. In simple words, asset valuation provides a quick picture of the overall financial health of a business.

What are the different types of assets of a business?

In a business, assets are categorized as tangible and intangible. Tangible assets referred to physical pieces of property or equipment owned by a business or entity, whereas intangible assets don’t exist physically, but they have a financial value as they represent potential revenue.

Tangible assets are considered the main type of assets. Furniture, building, machines, automobiles, etc., come under this category. These are the assets used by a company to produce its products and offer its service. Intangible assets include copyrights, patents, logos, and a company’s brand. Intangible assets add to a business’s future value or worth. This type of asset can’t be destroyed, so they are more valuable than tangible assets.

Both types of assets are mentioned on the balance sheet to allow creditors, investors, and banks to assess the value of the company. If a business owner needs to determine the specific value of its fixed assets, he/she can seek help from RNC, a leading asset valuation services provider having offices in four major cities like Mumbai , Vadodara, Ahmedabad, & Surat.

RNC offers quick, accurate and reliable insightful and advanced solutions to the clients who want asset valuation for hotels, restaurants, malls, multiplexes, residential and commercial properties, industrial properties, hospitals, power plants, and related properties. You can talk to one of our expert advisors about your business’s tangible asset valuation needs and get a quick and reliable solution.

What is the importance of Asset Valuation?

A business owner work-hard, spends a lot of time & energy, and money to increase company value by creating growth plans, strategies with well-defined goals. Each business owner wants to maximize the value of the company over time, but it’s hard without proper planning and knowing where to start.

A business valuation helps the business owner with various facts and figures regarding the actual value of the company. Asset valuation services help them to know the worth of their business. If you want to analyze your company’s growth, asset valuation should be done once a year.

Not only do business owners need to realize what their business is worth today, but they also have to understand how they can maintain or increase that value. In most cases, the owner’s overconfidence or lack of concern causes this important step to be neglected. For each business owner, it is important to understand that business valuation serves as a reality check for them with some figures and facts regarding their business’s net worth.

How does the asset valuation process work?

Asset valuation is the process of evaluating the current value of a company’s assets such as buildings, products, equipment, copyright, brands, goodwill, etc. Asset valuation is done as a component of a wider business valuation. It usually occurs before you buy, sell or insure a business. Various procedures are used to determine the monetary value of a business.

An accurate valuation of a business acts as an essential tool for a company’s owner to assess both opportunity and the costs involved as they prepare a plan for future expansion and eventual transition. It provides the net worth that will help the owner to decide whether to sell the business. At the same time, a buyer can also decide whether to buy the business at this price or not.

Business valuation is actually a simple and straightforward concept. Our qualified and licensed asset valuation professionals first analyze the business’s financial statement. They consider major transactions, industry ratios and other qualitative & quantitative information.

An asset will undergo various valuation techniques to produce its final value, involving relative models, absolute value models, and options pricing models. Our expert professionals use different models to give your asset the best possible valuation. They make applicable adjustments to align the business to an industry-standard or benchmark.

Despite the various benefits of asset valuation, many business owners ignore the importance of the valuation process. When you hire our valuation services, you will be able to know the current value of the company’s assets, including under-performing assets, best-performing assets, weak financial and accounting controls and weak operating ratios compared with its peer group. Our entire valuation process can provide you with an overview of the strengths as well as weaknesses of your company.

Have a quick look at the five major benefits of asset valuation-

  1. To protect the value of the business! As mentioned above, a well-prepared and reported valuation of the business asset will highlight weak areas in the business. It helps the business owners to mitigate weak points and prevent further depreciation of value. In the same way, threats to the business are also detected in the valuation process. It provides an opportunity for the business owner to remain proactive while encountering those threats. Estimates are not acceptable when you are running a big company. An accurate business valuation assessment needed to be done. Thus, hiring our business valuation services will be helpful.
  1. Knowing company resale value! If you want to sell your company, knowing its true value is very important. When your business goes up for sale on the open market, you can negotiate, provided you have started the evaluation process far before. Once you know the actual value of your business, you will have an opportunity to increase the company’s value to get a higher selling price. As a business owner, you must be armed with all relevant factors that impact the net worth of the business.
  1. Knowing the true value of your business! A company’s owner may have a generic idea of what their business is worth depending on simple data and analytics such as total asset value, stock market value and company bank balances. But, business valuation is not only about these simple factors, but it is more than that. Hiring a reputable business valuation company like RNC ensures that the correct asset valuation is provided .If you know the true value of your company, you’ll be in a position to decide if selling the business becomes a possibility. Furthermore, it helps to show the company’s valuation growth over the course of the recent few years. Prospective buyers like to buy a company that has witnessed regular, consistent growth since the time it is launched.
  1. To enhance the performance of the business! The asset valuation of the business may act as a benchmark to assess the overall performance of the business. A series of annual asset valuations provide important information and insights to shareholders so that they may appraise management and make appropriate amendments. An annual valuation of a company also provides performance metrics and boosts accountability.
  1. Taking advantage while merging or collaborating! If a leading company wants to purchase or merge with your company, you should be in a position to convince them what the value of your company is as a whole. What its asset is, how it has grown in recent years, and how it will keep on growing. Major companies will try to acquire your business or collaborate with it for as little money as possible. When you know your business valuation, you can negotiate your way by showing them appraised valuation numbers provided by reliable valuation services providers.
  1. Grab the attention of more investors! If you want to attract potential investors to fund your company to grow more or save it from financial tragedy, they will ask for a full company valuation report. Investors like to know where their money will be invested and how they will get a better return on the investment. If they can see that their investment will carry the company to the next level, enhance its value, and give them more money back into their own products, they are more likely to invest in your business.

Recommended, Find everything you need to know about Business Valuation in 2021

How can RNC help you?

RNC delivers advanced, reliable and professional business valuation services to provide you with an exact value of your assets. We have rich domain knowledge and industry experience in providing valuation services for tangible and intangible assets. We are working in the areas of valuation of fixed assets for M&A, dispute resolution, bank lending, insolvency, statutory compliances, financial reporting, etc.

We provide a clear snapshot of your business to give you an idea to work on weak points and also highlight the areas where you can focus on maximizing all of your business opportunities. Once your business’ valuation is done, you can set new goals to increase the company’s value in upcoming years. Having information about every component of your business is helpful in creating a compelling vision for your company. If you want to hire our business valuation services, we are happy to help you.