Asset-based valuation ignores the future potential of the company.

Therefore, use it only in situations

where ongoing operations are in jeopardy.

This means that in asset-based valuation, you can only use it during the present condition and
operations of the business. An asset-based valuation assesses the assets and the working capital of the
company. If you assess it for future operations, like for another fiscal year, it will not come in handy.
Asset-based valuation cannot foresee the future value of a company and businesses, for it cannot base
on something that no existing assets are present to be valuated upon. To understand my point more
clearly, for example, right now, you have all the needed assets during the current operations to assess
the value of your business through asset-based valuation, but if you are going to assess the value of your
business in the future, you would not be able to because there will no enough data and evidence that
proves that you have this certain amount of assets, you might have an increase or decrease from your
currents assets and we cannot just guess what amount our assets might be in the business’ future
operations.