The liquidation value indicates the proceeds that would be achieved in the liquidation of a company if the existing goods were sold individually. It is the sum of the individual selling prices. They can be considerably below the book values. So is z. B. a special machine with a book value of 100,000 € usually only for a fraction of its value or not at all salable.
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For sellers and buyers, the Company valuation:
The liquidation value usually represents the lower limit of the marginal price for the potential seller, unless the liquidation of the company is excluded for some reason. It shows the point below which the marginal price cannot fall for the potential seller. Because the potential seller of the company has no reason to approach any price offers from potential buyers that are below this amount.
It is left to the potential seller to liquidate his company and thereby realize the liquidation value.
Going concern value
The liquidation value can also be significant for the potential buyer. If the potential buyer intends to break up the company, the liquidation value represents the upper limit of the marginal price for him. Normally he will not want to exceed it.
A company to be continued must have a liquidation value that is less than the going concern value.