It all comes down to Tangible vs. Intangible Equity.
Book Value = Tangible Assets – Tangible Liabilities
But there is so much more to a company than that.
Tangible Assets are the things that can quickly become cash:
1️⃣ Cash and cash equivalents
2️⃣ Accounts receivable
3️⃣ Inventory
4️⃣ Land and buildings
5️⃣ Vehicles, machinery, and tools
To name a few.
Intangible assets can’t quickly be turned into cash,
But they still hold value.
In fact, the MOST valuable parts of a business are intangible assets:
1️⃣ Skilled workforce and management team
2️⃣ Goodwill (resulting from acquisitions)
3️⃣ Patents, copyrights, and trademarks
4️⃣ Customer relationships and loyalty
5️⃣ Brand recognition and reputation
6️⃣ Trade secrets and know-how
7️⃣ Non-compete agreements
8️⃣ Licenses and permits
9️⃣ Intellectual property
Without these, you just have money and a bunch of stuff…
Not a business.
A business is BUILT on intangibles.
That’s why they can make a company 10X as valuable as they are on paper.
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