Also known as intrinsic value, intrinsic worth is the actual worth of an asset, which may or may not be different from the current market value or book value of that asset. Value of this type is determined on a wide range of factors, with some of those considerations being intangible as well as tangible. Intrinsic worth is understood to represent the true value to the current owner, taking into consideration a number of issues that may not apply in other forms of valuation.
The focus of intrinsic worth is understanding the true value of an asset based on the condition of the asset and the range of benefits, both direct and indirect, that the owner receives from continuing to hold that asset. This is different from market value which relies on the current demand for the asset in the open market to determine its worth, and even different from book value which will allow for any appreciation or depreciation in resell or market value that may have occurred over time. With intrinsic worth, the focus is on how much value the asset provides the owner, and not what that asset could be sold for if such a sale became necessary.
The actual application of the concept of intrinsic worth when considering personal property will be different from assessing this type of value with some sort of investment or security. If the asset in question is a piece of real estate, the focus will be more on the range of benefits the owner receives from that asset. For purposes of evaluating the intrinsic worth or value of some sort of option, the focus is on identifying both the strike price and the price of the underlying stock, noting the difference between the two. In this scenario, it is possible that the intrinsic worth would amount to nothing, since there is the chance that the underlying stock’s vale and the strike price could be the same, resulting in a difference of zero.
Determining intrinsic worth is helpful with any type of asset. Taking the time to do so can help investors and owners to determine if there are reasons for continuing to hold onto the asset, or if selling at the current market price would ultimately be a good idea. Since intrinsic worth can involve considering factors that are generally not associated with determining book or market value, this broader approach can also help owners to better understand the repercussions of selling the asset, and make an informed decision of what to do next.
