what is liquidation value 
liquidation value is the net value of a company s physical assets if it were to go out of business and the assets sold the liquidation value is the value of company real estate fixtures equipment and inventory intangible assets are excluded from a company s liquidation value understanding liquidation valuethere are generally four levels of valuation for business assets market value book value liquidation value and salvage value each level of value provides a way for accountants and analysts to classify the aggregate value of assets liquidation value is especially important in the case of bankruptcies and workouts liquidation value does not include intangible assets such as a company s intellectual property goodwill and brand recognition however if a company is sold rather than liquidated both the liquidation value and intangible assets determine the company s going concern value value investors look at the difference between a company s market capitalization and its going concern value to determine whether the company s stock is currently a good buy not every asset can be sold for what was paid for it or what is still due on the note to buy that asset businesses look at the recovery rate on an asset by asset basis cash would have a 100 recovery rate accounts receivable inventory and plant equipment would have a lower recovery rate these rates tallied together will provide an estimated recovery value of a company in case of liquidation potential investors will assess the liquidation value of a company before investing investors want to know how much of their funds would be returned in the event of bankruptcy market vs book vs liquidation vs salvagemarket value typically provides the highest valuation of assets although the measure could be lower than book value if the value of the assets has decreased due to market demand rather than business use the book value is the value of the asset as listed on the balance sheet the balance sheet lists assets at the historical cost so the value of assets may be higher or lower than market prices in an economic environment with rising prices the book value of assets is lower than the market value the liquidation value is the expected value of the asset once it has been liquidated or sold presumably at a loss to historical cost finally the salvage value is the value given to an asset at the end of its useful life in other words this is the scrap value liquidation value is usually lower than book value but greater than salvage value the assets continue to have value but they are sold at a loss because they must be sold quickly discount footwear company payless filed for bankruptcy in february 2019 despite once owning 3 400 outlets in 40 countries the company announced it would close all of its u s and puerto rico locations example of a liquidationliquidation is the difference between some value of tangible assets and liabilities as an example assume liabilities for company a are 550 000 also assume the book value of assets found on the balance sheet is 1 million the salvage value is 50 000 and the estimated value of selling all assets at auction is 750 000 or 75 cents on the dollar the liquidation value is calculated by subtracting the liabilities from the auction value which is 750 000 minus 550 000 or 200 000 