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

Author

Listed:
  • Silvia Ghi?ã-Mitrescu

    (”Ovidius” University of Constanta, Faculty of Economic Sciences)

  • Cristina Duhnea

    (”Ovidius” University of Constanta, Faculty of Economic Sciences)

Abstract

The valuation of an entity is an intricate process leading to the establishment of its market value. A company’s value is created, on one hand, by its assets and liabilities and, on the other hand, by its capacity to generate future economic benefits. In order to evaluate the equity of a company a balance sheet-based valuation method is used, most commonly the adjusted net assets valuation method. The goal of this paper is to present the theoretical background of this method as well as its practical application. We will first analyze the main theoretical issues regarding the corrections that need to be performed in order to transform the book value of assets and liabilities to their market value, afterwards proceeding to an example on how this method is applied to the balance sheet of a company. Finally, we will conclude on the importance of the method for a company’s evaluation process.

Suggested Citation

  • Silvia Ghi?ã-Mitrescu & Cristina Duhnea, 2016. "The Adjusted Net Asset Valuation Method – Connecting the dots between Theory and Practice," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 521-526, July.
    • Handle: RePEc:ovi:oviste:v:xvi:y:2016:i:1:p:521-526
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    More about this item

    Keywords

    adjusted net assets method; balance sheet; book value; market value;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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