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Asset-based approach values the company with a focus on its balance sheet. One widely used method under this approach is net asset value method. It derives values from the combination of fair market value (FMV) of the companyโs individual assets and is commonly performed when the company is under acquisition, liquidation, or audit under different accounting standards (Damodaran, 2019b). Main procedures of the approach includes the definition of business ownership interest subject to valuation, definition of standard and date of the valuation, and evaluation of the total assets and liabilities (Kirk & Wishing, 2018). In mathematically terms, net asset value method can be shown as: ๐ = โ ๐น๐๐ โ โ ๐น๐๐ Where V denotes the estimated value of the company. ๐๐ ๐ ๐๐ก ๐๐๐๐๐๐๐๐ก๐ฆ (2.4) Asset-based approach is most useful when valuing holding companies, asset-intensive companies such as banks and distressed entities that arenโt worth more than their net tangible value (Dannible & McKee LLP, 2019). However, it relies heavily on historical acquisition cost of the assets, and does not take into account unrecorded intangible assets such as the companyโs employees, their knowledge and expertise, or its user base. Internet companies are not as intensive in tangible assets โ most of the companyโs assets are intangible, such as intellectual property, brand recognition and customer loyalty. Douyin is thus not very suitable to be valued under net asset value method. 2.1.3 Market approach Market approach bases the value of the company on comparable publicly traded companies. The main mechanism of market approach is to find a publicly traded company (โthe comparableโ) that operates - 16 -PDF Image | Analysis of ByteDance with a close look on Douyin TikTok
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