Liquidation Value
Corporate Credit Analysis glossary · Distressed Debt & Restructuring
Definition
The value realisable from selling assets piecemeal in a forced-sale environment; typically substantially below going-concern enterprise value due to distressed-sale discount and operational disruption.
Liquidation Value in plain English
Liquidation value is the harsh answer to one question: if a company had to shut down tomorrow and sell off everything it owns — trucks, buildings, inventory — one piece at a time, in a hurry, how much cash would that actually raise? It matters because it's often a company's rock-bottom floor, and lenders want to know it before they hand over money. The catch is that fire sales are cruel: buyers smell desperation and lowball you, and a machine that was worth a fortune while running is worth scrap once the factory goes dark. Think of selling your phone in ten minutes to make rent — you take way less than if you could wait for the right buyer. That gap below what the business is worth as a living, operating whole is exactly the 'distressed discount.'
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