Quantitative Easing (QE) and Asset Valuations
Definition
The monetary policy tool by which a central bank purchases financial assets to inject liquidity into the economy, typically lowering interest rates and inflating asset prices. QE periods tend to compress discount rates and elevate intangible asset valuations, making it critical for investors to understand the monetary environment when assessing enterprise value.
Complementary Terms
Concepts that frequently appear alongside Quantitative Easing (QE) and Asset Valuations in practice.
A physical asset with a finite monetary value, such as property, plant, equipment, inventory, or cash. Tangible assets are recorded on the balance sheet at cost less depreciation.
A valuation approach that estimates the value of a business by adjusting the book values of all assets and liabilities to their fair values, including the recognition of off-balance-sheet intangible assets that meet IFRS 3 or ASC 805 recognition criteria. The adjusted net asset method is primarily used for asset-holding companies, investment vehicles, and businesses where value resides primarily in the asset base rather than earnings capacity.
A non-physical asset that derives value from intellectual or legal rights, or from the competitive advantage it provides. Examples include brands, patents, software, customer relationships, data, organisational know-how, and human capital.
The proportion of a company's total assets or total investment that is attributable to intangible assets. A high intangible asset intensity — common in technology, pharmaceutical, and professional services firms — indicates that value creation is driven primarily by knowledge, data, and relationships rather than physical capital.
The total value of a company's or fund's assets minus its liabilities. For investment funds, NAV represents the per-share or per-unit value.
A charge applied in the multi-period excess earnings method to account for the fair return attributable to other assets that contribute to the cash flows being valued. Contributory asset charges ensure that the residual earnings attributed to the subject intangible asset are not overstated by stripping out returns earned by tangible assets, working capital, and other identified intangibles.
An intangible asset that meets the identifiability criteria under IFRS 3 or IAS 38, meaning it is either separable from the entity (can be sold, transferred, or licensed independently) or arises from contractual or legal rights. Identified intangible assets are recognised separately from goodwill in purchase price allocations.
A ratio measuring the efficiency with which a company uses its assets to generate revenue, calculated as revenue divided by total assets. A higher asset turnover indicates more productive use of the firm's asset base.
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