What does the asset based approach typically start with?

The asset-based approach typically begins with total assets because this method evaluates the value of a company based on the sum of its assets, both tangible and intangible. By assessing total assets, analysts can determine what the company owns and how much it would be worth if all assets were liquidated or sold. This approach calculates the net worth by subtracting total liabilities from total assets, giving a clear picture of the company’s financial health and the value available to shareholders.

While total revenue, total equity, and total liabilities are important financial metrics, they do not serve as the starting point in the asset-based valuation process. Total revenue pertains to income generation over a period, total equity represents the owners' residual claim after liabilities have been deducted, and total liabilities detail what is owed to creditors. Consequently, these metrics are used later in the analysis or in other financial models rather than initiating the asset-based approach.