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
- 6 Money Lies We All Believe
- Bull Vs. Bear: 6 Burning Questions About LINN Energy Answered
- Berkshire Hathaway Still Looks Undervalued
- The Government Might Leave Fannie Mae and Freddie Mac Alone
- 3 Things to Watch in Prospect Capital Corporation?s Third-Quarter Report
- 3 Investments That Could Lose You Lots of Money