Liquidation Value of Assets
The liquidation value of an asset is its value if liquidated (sold) quickly to raise needed cash. Liquidation value is usually significantly less than the value if the asset were sold at fair market value.
Liquidation Value of a Business
The liquidation value of a business is the price that can be obtained for a business that is, or will soon be, ceasing operations. Because there is no longer a customer base, there is no value in "goodwill," and the value of assets is lower because the business must be sold quickly. Liquidation value applies in a Chapter 7 (liquidation) bankruptcy.
Liquidation value can vary based on whether the business liquidation is forced (over a short period of time, with assets being sold off quickly to satisfy creditors) or orderly (more strategic, over a longer time period, to gain the maximum from each asset).
A liquidation valuation may be included in a business valuation report to show the lowest possible valuation of the business and its assets.
