Appraisal Approach

AAA

DEFINITION of 'Appraisal Approach'

A procedure for determining an asset's value. The appraisal approach values assets based on a number of factors, such as its cost, the income it generates or its fair market value as compared to similar assets. A different dollar value will be assigned to an asset depending on which of these factors the appraiser primarily bases his or her estimate on. Sometimes the appraised value will not coincide with an asset's market value and buyers will often pay more or less than an asset's appraised value based on what the asset is worth to them. No matter which appraisal approach is used, an appraisal is only an educated guess as to what price the asset would fetch in a free market.

INVESTOPEDIA EXPLAINS 'Appraisal Approach'

Appraisals are used to determine the worth of high-value assets such as real estate, jewelry, businesses and vehicles. They are usually performed in conjunction with a sale or for insurance purposes. For the results to be taken seriously, an appraisal must be conducted by an individual with expert knowledge of the asset being assessed. A diamond ring should be appraised by a jeweler, and a business should be appraised by a valuation firm.

RELATED TERMS
  1. Sales Comparison Approach - SCA

    A real estate appraisal method that compares a piece of property ...
  2. Appraisal Capital

    A form of accounting adjustment. Appraisal capital is created ...
  3. Appraisal Method Of Depreciation

    A form of depreciation calculation that is based upon appraisal ...
  4. Appraisal Right

    The statutory right of a corporation's minority shareholders ...
  5. Appraised Value

    An evaluation of a property's value based on a given point in ...
  6. Appraisal

    A valuation of property (ie. real estate, a business, an antique) ...
RELATED FAQS
  1. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  2. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  3. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
  4. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  5. What metrics can be used when evaluating a telecommunications company to ensure its ...

    Cash flow analysis has been transformed since the widespread introduction of statements of cash flow, and investors have ... Read Full Answer >>
  6. How do you record adjustments for accrued revenue?

    An accountant records adjustments for accrued revenues through debit and credit journal entries in defined accounting periods ... Read Full Answer >>
Related Articles
  1. Markets

    Relative Valuation Of Stocks Can Be A Trap

    This method of valuing a company can make it look like a bargain when it is not.
  2. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  3. Investing

    Using DCF In Biotech Valuation

    Valuing firms in this sector can seem like a black art, but there is a systematic way to pin a price on potential.
  4. Fundamental Analysis

    The Financial Characteristics Of A Successful Company

    There are many factors that contribute to a profitable business. Find out what they are here.
  5. Markets

    How To Choose The Best Stock Valuation Method

    Don't be overwhelmed by the many valuation techniques out there - knowing a few characteristics about a company will help you pick the best one.
  6. Bonds & Fixed Income

    8 Reasons M&A Deals Fall Through

    Mergers and acquisitions can mean big success. But what about all the deals that fall through?
  7. Trading Strategies

    IPO Flippers And The Companies Who Hate Them

    Learn how flipping activity affects an initial public offering.
  8. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  9. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  10. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!