Liquidation value asset based approach

From Wikicpa

A liquidation value is used selectively in valuations of closely held businesses since it does not result in a going concern value. A going concern value assumes that:

• the entity is engaged in a business enterprise
• the entity is currently operating that enterprise, and
• the operations are either profitable or have prospects of profitability or the ability to continue into the foreseeable future.

The liquidation value defined as the net amount expected if assets are sold and the proceeds used to pay liabilities.

Types of

Orderly liquidation

An orderaly liquidaiton occurs when a resonable amount of time is allowed to dispose of the business' assets.

Forced liquidation

A forced liquidation occurs when no time is allowed by the owners or creditors to search the market for a buyer. Sometimes called a "fire sale."