Liquidation Value

simms_liquidationvalue

A company’s liquidation value can be calculated using various methods.

Theoretical formulas that can be used are as follows:

A) Basic:  (Total Assets – Total Liabilities)/Total # of Shares

B) Adjusting for Intangibles:  (Total Assets – Intangibles -Total Liabilities)/Total # of Shares

C) Adjusting for Intangibles and some sort of loss on book value of inventory and PPE:

(Total Assets – X*(PPE) – Y*(Inventory) – Intangibles -Total Liabilities)/Total # of Shares Where X equals impairment on PPE and Y equals impairment on Inventory.

D) Adjusting for everything above Plus loss on Accounts Receivable:

(Total Assets – X*[PPE] – Y*[Inventory] – Z*[Accounts Receivable] – Intangibles -Total Liabilities)/Total # of shares.

X equals impairment on PPE,

Y equals impairment on inventory

Z equals the % of Accounts Receivable that are uncollectible.

Example D contains the most comprehensive and most accurate formula available.

One thought on “Liquidation Value”

Comments are closed.