Going Concern
Corporate Credit Analysis glossary · Distressed Debt & Restructuring
Definition
The assumption that a business will continue to operate and generate cash flow. Going-concern enterprise value is contrasted with liquidation value in recovery analysis.
Going Concern in plain English
'Going concern' is just the assumption that a business will keep operating into the foreseeable future rather than shutting down tomorrow. That matters enormously when estimating what a troubled company is worth, because a living, cash-generating business is almost always worth far more than the same company chopped up and sold for parts. Think of a working restaurant: as a going concern it's worth its future profits, but 'liquidation value' is just what you'd get selling the ovens, tables, and fridge secondhand. When analysts estimate how much lenders would recover in a default, they compare these two views, the business kept alive versus the business scrapped.
Learn these first
Related Corporate Credit Analysis terms
Corporate Credit Analysis practice questions · Corporate Credit Analysis flashcards · Corporate Credit Analysis study guide