For any business valuation, assigning the right value to its assets is vital. Both buying and selling parties need to agree on a justified value of the transaction for each business asset, individually or as a whole. But before understanding how to value each asset correctly, you should know they are divided into three categories, namely current, non-current, and intangible assets.
How to Value Current Assets?
Current assets are also known as short-term assets including liquid assets such as inventory and receivable. Overall, the category covers all the assets that will convert into cash within the upcoming 12 months. Calculating their value requires a review of the balance sheet and stock on hand of a business. To get this right, you can take help from a professional accountant or financial advisor.
How to Value Non-current Assets?
Non-current (or fixed) assets are the permanent (long-term) ones such as buildings, plants, land, tools, machinery, and other equipment. Calculating their value is relatively simple. All you need to do is subtract the depreciation value from the purchase cost. This may work opposite for certain items like land whose value can go up with time.
How to Value Intangible Assets?
These are key players in creating and maintaining a strong business value. Copyrights, patents, customer lists, intellectual property, and goodwill are some options on the list. The value of intangible assets doesn’t change as it does for tangible ones. Thus, you should let a professional do the job.
It’s always suggested to go for professional valuation services over DIY to know how much your business is worth. Whatever path you choose, this guide can help you find a more realistic market value.