Adjusted Book Value & Liquidation
The asset approach answers a different question: what would it cost to assemble this balance sheet, or what would it fetch if the doors closed? If an income method lands below adjusted book value, either the earnings are understated or the business is worth more dead than alive — and the report has to say which.
THE FORMULA
Value = Assets at market − Liabilities at market
Orderly liquidation applies discounts by asset class; forced liquidation applies steeper ones.
When to use it
- The company is capital-intensive: equipment, real property, or heavy inventory.
- Earnings are weak or negative, making income methods unreliable.
- A holding company or an investment entity is being valued.
- You need to demonstrate the floor beneath your conclusion.
When it misleads
- The value plainly sits in goodwill, relationships, or process rather than assets.
- No recent appraisals exist for the significant fixed assets — an unsupported market value is a guess.
- Intangibles that would transfer are ignored, understating a going concern.
What ExitSight asks you for
| Input | Where it comes from |
|---|---|
| Balance sheet by line | Imported or entered; book values as reported |
| Market value adjustments | Per asset class, with basis and appraisal reference |
| Off-balance-sheet items | Leases, contingencies, and unrecorded liabilities |
| Liquidation discounts | Orderly and forced scenarios, applied by class |
Worked example
The sample engagement’s balance sheet groups, as entered on the Business Goodwill worksheet:
| Cash | $120,000 |
| Accounts receivable | $100,000 |
| Inventory | $420,000 |
| Other current and fixed assets | $200,000 |
| Total assets | $840,000 |
| Less current liabilities | −$95,000 |
| Net tangible assets | $745,000 |
In the report
Prints as Table 4 with the restated balance sheet, adjustment basis per line, and both liquidation scenarios. See the sample report ›