Asset-Based Approach

The best way to find out what something is worth? Sell it. Short of that, analysts have to make educated guesses.
When trying to figure out the value of a company, several ways to calculate these estimates exist. The asset-based approach represents one common way.
The math involved can get complicated, but the concept is fairly simple. To figure out the how much a company is worth, add up the value of the assets owned by the firm.
There are limitations to this approach. Not every company can get boiled down to the sum of its assets. McDonald's is worth more than a bunch of real estate and a pile of hamburger meat. Its brand, its business process and other intangible benefits make it more valuable than the asset-based approach would imply.
For that reason, the asset-based method only makes sense in certain situations, such as holding companies or companies that are failing and headed for liquidation.