Which approach to valuation starts with modifications to the statement of financial position?

The asset-based approach to valuation focuses primarily on assessing the value of a company's total assets and liabilities as presented in the statement of financial position. This approach starts by making necessary adjustments to the company's balance sheet, which includes re-evaluating assets to reflect their fair market value and accounting for liabilities accurately.

This method is particularly useful when valuing businesses that have significant tangible assets, as it gives a clear view of what the business would be worth if liquidated. By starting with the financial position and making modifications, analysts can derive a valuation that reflects the net asset value, providing a solid foundation for understanding the company's worth from an asset perspective.

In contrast, the income-based approach emphasizes future earnings potential and does not start with the balance sheet, while the market-based approach focuses on comparative analysis with similar entities in the market. The dividends-based approach is particularly relevant to companies that issue dividends, but it does not prioritize the financial position in the same direct way that the asset-based approach does.