Importance Of Company Asset Valuation

By Marissa Velazquez


Company asset valuation is a procedure that is undertaken by companies to find out the worth of items that are owned and controlled by them. Mostly, this is conducted before it indulges in major asset transactions like buying and selling of shares, insurance and loans. The importance of this is that it facilitates the generation of reliable monetary values used in the transaction.

There are two types of valuers; internal and external. Internal valuers may be more conversant with the appropriate information in the business thus more efficient. However, they can be very biased and cause you to make biased decisions. External brokers are more professional and neutral thus the information they provide is guaranteed to be more reliable.

You should provide the valuers with all the relevant information that they need to come up with their conclusions. Any important aspect that can be used in the calculations should be presented to them so that the information that is produced is reliable and can be used by the management to arrive at decisions. Perhaps the most utilized records are the financial records and marketing plans.

One of the methods that you can use is called the net worth method. This one works on the values provided for all the assets and the liabilities. The difference between the two provides you with the net worth of the business. The major disadvantage of this method, however, is that you cannot accurately determine the value of intangible assets.

Information on the profits of the business and the returns on investment are very useful in calculating the net profits. As much as it is the most common method, some people have criticized it saying that the annual increase or decrease in profits or income are not taken into account. Therefore, considering that all the methods have their merits and demerits, it is wise that you use a combination of methods.

Assets are categorized into tangible and intangible assets. Tangible assets include current and non-current ones. In valuing current assets, information is extracted from the balance sheet as to the assets, liabilities and capital that occur to a company as at a certain time of the year. The stock at hand is the most useful piece of information.

Non-current assets are valued according to the amount of depreciation they undergo cumulatively over the years. Therefore, the accumulated value is subtracted from the original one to get the worth of the asset as at that financial period. The intangible assets that exist are valued on the projected values and calculated return on investment.

Check to ensure that those who provide company asset valuation services are very well qualified for the job. You will be sure that the kind of feedback you are receiving is highly reliable thus you can use it in making your company decision. This is especially when the future of the business relies on such decisions.




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