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
- The Future of These 2 Big Dividends Might Be Powered By Garbage (No, Really)
- Sempra Energy?s Future Could be Fueled by LNG
- Is SandRidge Mississippian Trust II Worth a Long-Term Investment?
- Why BreitBurn Energy Partners' Acquisition of QR Energy Is a Great Move
- Home Depot?s 3 Part Recipe For Success
- German Soccer Can Teach You About Retirement Planning