Liquidation value differs from book value in that book value usually lists assets at the lower of cost or market or in the case of machinery at depreciated value. Going concern value is often based on some multiple of earnings. Book value is based on the cost of assets. Liquidation value goes the next step and attempts to estimate the current market value of assets if they were sold.
In the event of bankruptcy, liquidation value minus outstanding debts gives a better estimate of funds likely to be available to shareholders.
Related Fool Articles
Recent Mentions on Fool.com
- Here?s What Drove Rex Energy Corporation?s Stock 15% Higher in June
- General Motors: What Investors Need to Know About Its $600 Million Special Item
- 3 Energy Companies That Will Do Well Despite Low Oil Prices
- Here?s Why Energy XXI Ltd.?s Stock Nosedived 21.7% in June
- Is Baidu Inc. (ADR) a Buy?
- Using a DCF Model to Value Biotech Stocks