Liquidation value

What a business's assets would raise if it stopped trading and sold them, less its liabilities and the costs of selling. Usually below going concern value, and a floor for a failing company.

Where you will meet it

Liquidation value appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain what assuming a going concern means and set a going concern value against a liquidation value
  CFA Level II · Equities

  “That going concern value is usually higher than liquidation value, which is what the assets would raise if the business stopped trading and sold them, less its liabilities.”

• Explain how special situations are investigated and valued before capital is committed
  CFA Level III · Private Markets Pathway

  “Valuation compares going-concern enterprise value, from DCF or multiples, with liquidation value, then runs the recovery waterfall by priority under several scenarios weighted by probability.”

See also

Going concern

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with L · Glossary