Liquidation value

Liquidation value is what a business would fetch if its assets were sold off piecemeal and its liabilities settled, giving a floor value for a firm that may be worth more shut down than kept running.

ByHoang TruongUpdated July 11, 2026

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A company's assets — €50,000 cash, inventory recoverable at 60%, equipment at 40%, receivables at 80% — realise gross proceeds of €370,000 in a forced sale. Subtracting €150,000 of liabilities and €18,500 of liquidation costs, 5% of proceeds, leaves €370,000 minus 150,000 minus 18,500, or €201,500, for shareholders.

Where it fits

SubjectCorporate FinanceAdvancedTopicBusiness Valuation & DCFAdvanced

The formula

LaTeX

LV = \sum_i (A_i \times r_i) - L - C

Variables

$L V$: Liquidation value of equity (€)
$A_{i}$: Book value of asset category i (€)
$r_{i}$: Expected recovery rate on asset category i (%)
$L$: Total liabilities (€)
$C$: Liquidation costs (€)

Estimates what remains for shareholders after selling each asset category at its expected recovery rate, paying off liabilities, and covering the costs of the liquidation itself.