Types of liquidation value. Liquidation value of the apartment

Liquidation value is the maximum price at which an organization can be sold in the event of emergency liquidation, that is, within a limited period of time. It is always less than nominal. It is important to note that liquidation value refers to the maximum price at which it can be sold. Often companies are sold at an even lower price, however, this is a drawback of the management system.

Liquidation value depends on many factors and the structure of the enterprise; it is required in case of bankruptcy or emergency sale. The assessment of liquidation value is carried out by private experts or special organizations.

An important condition for the appearance of liquidation value is unforeseen events that affected the enterprise or. In addition to bankruptcy, the liquidation value can also be calculated as a precautionary measure.

The main internal and external factors on which the liquidation value depends

• Time period for sale. It is also called the exposure period. The price of the company is directly proportional to the time allocated for the sale. The lower the exposure, the lower the cost. The timing is determined based on many factors, primarily taking into account demand and also the type of enterprise.

• The company's position in the market and the economic situation in a certain segment.

• Attractiveness to potential buyers. Usually it depends on the level of equipment of the enterprise and the condition of the means of production.

• It is important to take subjective factors into account.

In what cases is an expert assessment required:

• or a real threat of its occurrence.
• Cases where enterprises are obviously lower than the profit from the sale. Then a liquidation procedure is carried out, which allows you to save part of the funds. This also includes situations of sudden changes in market conditions, when the production process becomes expensive.

If a business makes an assessment of salvage value, this does not necessarily indicate a subsequent sale. This is a precautionary measure in case of emergency.

Methods for assessing liquidation value

There are two main methods - indirect and direct. The choice of methodology depends on the type of enterprise; the calculation results may differ slightly when using different approaches.

• Direct calculation method. Based on a comparison of the main characteristics of the enterprise. First of all, the sales volume in the company and from competing organizations is analyzed. Then they evaluate the main production indicators and, based on the data obtained, make a conclusion about the optimal cost. When applying this technique, little attention is paid to the timing of exposure, but it gives an idea of ​​how much the liquidation value is less than the average market price for such a company.

• The indirect calculation method involves the allocation of liquidation value based on the market value. First, , is calculated, and then the discount amount associated with the exposure period is determined separately. The main difficulty in applying this method is calculating the discount, since it depends on many factors, including subjective ones. According to statistics on the Russian market, the average discount is approximately 20-50%. The indirect method is used mainly by experts, since it is necessary to have a clear understanding of market trends in order to calculate the adequate cost of a forced sale.

Calculation of liquidation value in crisis conditions

There is a practice of selling production at market prices in stable market conditions. When a crisis occurs, additional factors affect implementation, which significantly reduce the cost. The main difficulty is that during periods of crisis it is impossible to obtain reliable statistical data for calculations. Therefore, in an unstable economic situation, they often resort to the indirect method. The accuracy of estimating liquidation value depends on the competence of experts.

Many enterprises sell their assets, usually comprising production infrastructure, at liquidation value. This may be due to various reasons - the need to modernize factory lines, the desire of the business owner to sell the company and move to another segment, the need for speedy settlements with creditors. What are the specifics of selling objects at liquidation value? What factors influence the determination of its value?

What is salvage value?

Liquidation value is the monetary indicator of the valuation object, reduced by the amount of costs associated with its sale (for example, commissions, advertising costs, storage, delivery, etc.). In practice, the need to define it arises if the corresponding object needs to be implemented as soon as possible.

As a rule, the calculation of liquidation value is carried out if a commercial company leaves the market through bankruptcy or pays off debts with existing assets in the form of certain infrastructure facilities.

An enterprise can also decide to sell assets at liquidation value if, for example, it involves selling a business or optimizing its production model to meet new market requirements. Then the presence of outdated, from a technological point of view, enterprise funds may cause a shortfall in profit in an amount exceeding that which would characterize the sale of assets at standard prices. Therefore, the liquidation value of fixed assets can be reduced to a minimum - only so that the company will sooner have the opportunity to modernize production facilities, and then begin to extract more revenue due to the release of more technologically advanced groups of goods to the market.

A prompt sale of a company’s assets may be in demand if the business owner decides to engage in work in a fundamentally different segment, and he urgently needs cash. Selling company-owned assets at a reduced price may be preferable to taking out a loan, since interest payments on it may be significantly greater than the difference between the liquidation and standard price of the assets.

As a rule, the considered indicator is significantly lower than current market prices for the corresponding objects. But provided that the company’s management works effectively, the liquidation value of the asset can be generally comparable to the standard one. Moreover, if the object being sold is characterized by high price volatility, then it can, theoretically, be sold more profitably (at the peak of market value) than if the sale was carried out at regular prices, but during a period of declining prices.

It may be noted that the liquidation value of an object in some cases is not calculated in a short time. For example, if a multi-stage and, as a rule, lengthy bankruptcy procedure for a large enterprise is carried out. In this case, the price of the object being sold may not differ so significantly from the market price.

Classification of liquidation values

Liquidation value is actually a collective name for several rather dissimilar indicators. Therefore, an important nuance in considering its specifics will be classification. Experts distinguish the following types of liquidation value:

Short-term or forced;

Medium term;

Reflecting the process of writing off illiquid or unsaleable assets.

The first scenario involves selling the company's assets as quickly as possible. It may correspond to a situation in which a company urgently needs to pay off its debts.

The second type of liquidation value involves the sale of the company's assets over a fairly long period. This may correspond exactly to the scenario of a standard bankruptcy procedure for a large business. The main task of the company's management is to sell assets so that their value is close to the market value.

The third type of liquidation value is reflected mainly in negative values, since it does not involve the sale, but the write-off of assets. The company usually does not receive any income from this operation.

How is liquidation value calculated?

Having examined the definition of liquidation value and the main approaches to its classification, we will study how the indicator in question is calculated. The solution to the corresponding problem is carried out in several main stages.

First of all, the company's management develops a schedule according to which it is planned to liquidate the company's assets. The next stage is calculating the value of assets, as well as possible costs associated with their liquidation. Next, the corresponding indicator is adjusted taking into account the urgency of the sale of the object and other circumstances of the procedure in question. This may take into account, for example, the magnitude of the company’s obligations, the fulfillment of which requires the sale of the company’s assets at liquidation value.

As for the direct calculation of the indicator under consideration, it is carried out taking into account data on the company’s balance sheet. Their determination involves conducting an inventory of the company's property. In some cases, when calculating the indicator in question, the gross proceeds from the sale of assets are also calculated. Operating profit figures during the liquidation period may also be taken into account.

When calculating the optimal value of the value of the company's assets being sold, priority costs associated with calculating salaries for personnel, transferring payments to the budget, and monetary transactions to creditors who are not involved in the bankruptcy procedure are taken into account (if the liquidation sale of the company is associated with it).

Formula for calculating liquidation value

How is liquidation value calculated? The formula for calculating this indicator includes the following components:

• current market price of the property;
• adjustment factor;
• an indicator reflecting the fact that the asset needs to be sold within a timely manner.

The sequence of calculations when applying the formula in question is as follows. First, the value of the adjustment coefficient is determined, taking into account the urgency of sales, the current level of demand for the object being sold, and its characteristics. The element of the formula under consideration has an average value of about 0.3. That is, we can say that the liquidation value is an indicator that is approximately 30% lower than market prices for the object being sold.

Once the size of the adjustment coefficient is determined, it is necessary to subtract it from 1. Afterwards, multiply the resulting figure by the market value of the object being sold. The most difficult thing, therefore, when calculating the liquidation price of an asset is to calculate the adjustment factor. Market value is an indicator that can be determined without any problems. In order to calculate the coefficient, it may be necessary to refer to statistical data reflecting the specifics of transactions for the sale of objects at liquidation value in the past, which were carried out by firms in the same segment in which the enterprise that is promptly selling its assets operates. But it is possible that the coefficient will be significantly lower than the statistical average, especially if certain factors contribute to this. Let's consider their specifics in more detail.

Salvage value factors

What factors can influence such an indicator as the liquidation value of the enterprise as a whole and the most problematic element of the formula for calculating them - the adjustment factor?

First of all, these are the desired timing of sales of the relevant assets. In many cases, their duration is directly proportional to the billed price of objects sold by the enterprise. Liquidation value is an indicator that depends on the characteristics of assets. If this is real estate, then the material of its manufacture, type, location, and year of construction are taken into account.

There are external factors to liquidation value. First of all, this is the level of supply and demand on the market in the segment to which the object being sold belongs. The political factor is also external - it may be important in terms of the size of the market in which the sale of the enterprise asset is expected. It is quite possible that representatives of certain states will not be able to purchase the object. Or the company, in turn, will not be able to offer its assets in certain foreign markets.

Correlation of residual and initial value with liquidation value

When calculating liquidation prices for objects, their residual value can be taken into account. That is, a value based on the original price of the asset, reduced by an indicator that reflects the degree of depreciation of the object. If, from a technological point of view, it corresponds to the level of new equipment, and the level of demand will have the same dynamics as during its acquisition, then the residual value of the corresponding object will most likely be as close as possible to the liquidation value. But if this asset is a technologically outdated element of infrastructure, it is likely that its price upon prompt sale will be significantly lower than the residual value.

Of course, theoretically, the initial value of the object can also correspond to the liquidation value. This is possible with a minimum level of wear and tear (as an option - if it was not used in production cycles) or, for example, if a market situation has arisen in which the demand for the corresponding equipment significantly exceeds supply.

Another possible factor that can affect the liquidation price of an asset is its location, as well as the costs associated with moving the equipment to the buyer's premises. It may turn out that the transport costs of delivering an infrastructure element will be so high that the seller will have to reduce the price so that the corresponding costs are acceptable to the buyer. In turn, it is quite possible that the costs of moving equipment will be significantly lower than if the partner had purchased the infrastructure elements elsewhere. Then the liquidation value of the equipment can be reasonably increased by the company.

Changes in exchange rates as a factor in liquidation value

Thus, the prompt sale of a company’s infrastructure does not always imply a significant loss of profit. It is possible that even the initial cost of the equipment sold will be lower than the liquidation value. Although, of course, this is an exception to the rule. Such situations are most often possible in cases where there is a significant increase in the price of the currency for which the object was purchased in the past. A decrease in the value of an asset due to wear and tear and even technological obsolescence may, however, be accompanied by receipt of revenue that exceeds the cost of acquiring the corresponding element of infrastructure - if the currency for which it is purchased has risen in price by more than the amount of the adjustment factor.

At the same time, foreign partners of the company may show special interest in purchasing equipment at liquidation prices corresponding to the initial price of the infrastructure. Due to the depreciation of the currency of the state in which the selling company is registered, a foreign organization may find the prospect of purchasing, albeit outdated and somewhat worn-out equipment, but cheaper in terms of the currency of its own state, very attractive. Therefore, one of the very effective approaches to successfully selling a company’s assets at liquidation prices is entering foreign markets.

Methods for determining liquidation value

Let us now study what methods there are for estimating liquidation value. Experts identify 2 main mechanisms of the corresponding type: direct and indirect. Let's consider their features.

The direct method of assessing the liquidation assets of a company involves comparing sales processes and analyzing the dependence of the value of assets on the factors that influence them.

The indirect method of asset valuation involves determining their value based on market indicators. They are taken as a basis and adjusted based on the urgency of sales, as well as the nature of the requirements of the company’s creditors.

Which of the methods under consideration for the liquidation value of assets is more effective?

Each of them has advantages and disadvantages. The direct method is especially good in cases where the firm's managers have at their disposal a sufficiently reliable statistical database reflecting liquidation transactions concluded by firms in the segment in the past. The indirect method, in turn, will be more effective if the company is not able to use the previous experience of firms in terms of relevant transactions.

Crisis factor when assessing liquidation value

There are a number of features in calculating the liquidation value of a company’s assets in crisis conditions. The fact is that in such a situation, it is not easy for the company’s management to determine the optimal price for the object being sold (due to the fact that even its typical market value is unstable).

This factor can predetermine, on the one hand, some benefit for the company. As we noted above, with high price volatility, selling assets at the peak of value, even at the liquidation price, can be a good decision. It is during a crisis that such volatility can develop. On the other hand, it is unknown in which direction prices for the corresponding asset will begin to move next. During a crisis, it can be difficult to predict the dynamics of demand for certain objects. It is likely that it will decline, as a result of which the liquidation value of assets may fall so much that their sale becomes meaningless - the proceeds from the sale will not be enough to compensate for debts.

Therefore, in a crisis, a good alternative to selling assets at liquidation prices may be to conduct new rounds of negotiations with creditors. It is likely that in order to maintain a constructive relationship with the client, they will meet halfway.

Summary

So, we have studied the specifics of selling infrastructure facilities of a commercial enterprise at prices that reflect their liquidation value. The sale of relevant assets can be carried out if:

• the company is in bankruptcy;
• the owner of the company sells the business in order to move to another segment;
• the company urgently needs to pay off its loans;
• the company is modernizing its production lines, and their speedy renewal will predetermine the amount of benefit that exceeds the amount of lost profit due to the difference between the standard and liquidation value of the equipment.

When calculating the indicator in question, the market value of the objects being sold, their initial price, as well as various factors influencing the formation of supply and demand in the relevant segment, the dynamics of technological development in the production of equipment for the same purpose that is sold by the company are taken into account.

A very significant factor in determining the liquidation price of an object may be the exchange rate of the national currency. A crisis factor can also have an impact on the process of prompt sale of a company’s assets. Depending on the market situation, on the level of existing knowledge of managers regarding liquidation transactions in the past, the optimal method for valuing the company's assets is selected.

Calculation of liquidation value is relevant when it is necessary to sell the assets of an enterprise in a short time. Allows you to quickly sell objects at the best price. The price should be attractive to potential clients, but not too low. Determining it will require taking into account many factors.

What is salvage value?

Liquidation value– this is the price of the enterprise’s assets, from which sales costs are subtracted.

The decrease in value is due to the need to sell objects in a short time, which arose as a result of the following factors:

• companies.
• The need for settlements with creditors.
• Sale of the enterprise.
• Optimization of production capacity.
• The need to purchase new equipment to replace outdated ones.
• Changing the direction of the enterprise's activities.

Expenses for commission fees, transportation, advertising, and storage are deducted from the real value of assets. A discount is provided to quickly attract buyers. As a result of all deductions, the value of the assets decreases. The market price for properties is almost always higher than the liquidation value.

IMPORTANT! Selling at liquidation value can be financially beneficial to the business. These cases are typical when there is an acute demand for the asset being sold and an increase in prices for it. In such a situation, the company can sell the property at a cost that exceeds standard prices.

Types of liquidation value

Liquidation value can reflect various indicators. It is divided into the following types:

1. Short-term or forced. Formed as a result of urgent sale of objects. Due to the tight deadlines, the cost is reduced to a minimum. This indicator may be required when calculating debts that cannot be deferred.
2. Medium term. A relatively long time has been allocated for the sale of assets. The manager's task is to sell objects at a cost close to the market price. The possibility of deferring the sale allows you to competently carry out an advertising campaign and find buyers.
3. Long-term. Long-term salvage value is determined when assets need to be written off. In this case, the company will not receive any funds for the objects.

Typically, liquidation value refers to prices for the sale of assets. The price reduction will depend on two variables: the circumstances of the implementation and the professionalism of the manager.

Procedure for assessing liquidation value

Correct determination of drugs allows you to reduce company costs. In favorable circumstances, the sale of assets can even bring profit. Cost determination can be divided into the following stages:

1. Analysis of information obtained from accounting. This information allows you to determine the book value of assets. As part of this stage, the availability of the property being sold must be verified. The real market value of the objects is revealed.
2. Determination of sales costs. It is necessary to establish a list of likely expenses during the sale. These include spending on advertising, posting ads, and searching for a client. You also need to consider the cost of storing assets. At the second stage, the feasibility of the sale is determined. Selling assets is not always the best option. If the costs exceed the salvage value, it is easier to destroy the object.
3. Development of a liquidation schedule for each facility. A separate schedule for each asset is necessary because some objects are quite easy to sell, while selling others will take a long time to find a buyer.
4. Determining the amount of reduction in value. First of all, the cost is reduced for those objects that are difficult to implement. An attractive discount plays a role in quickly attracting customers. Assets for which there is acute demand can be sold at a price close to the market value.
5. Sales organization. Actions are taken aimed directly at the sale of property. These may include advertising campaigns and customer searches. If the sale is found to be inappropriate, the property is destroyed.

It is recommended to rely not on a quick sale, but on maximizing profit from the sale. Typically, the manager is looking for the maximum price at which buyers will appear in the near future. Its specific size is determined by the type of asset. For example, it is possible to sell new equipment, for which there is acute demand, at market value. With outdated technology, such a number will not work.

Formula for calculations

There are several formulas for determining liquidation value. The most relevant is the one that allows you to bring prices closer to market prices:

LP = Market value x (1 - Coefficient for forced sale)

The coefficient can be 0.1 - 0.5 or 10 - 50%. Its exact value is determined depending on the market price of the asset. The coefficient is established as a result of an expert assessment. It depends on the following factors:

• expected implementation timeframe;
• depreciation of equipment and its type;
• market valuation of the asset;
• general situation in the required market segment.

If it is impossible to conduct an expert assessment, the coefficient is set at the lower limit. That is, it will be 0.5.

Calculation examples

The company urgently sells equipment for settlements with creditors. Its market value is 50,000 rubles. The forced sales coefficient was not calculated; the lower level was taken as a basis. The drug calculation will be as follows:

50,000 multiplied by (1 - 0.5)

As a result, we receive a liquidation value equal to 25 thousand rubles.

IMPORTANT! The coefficient depends not only on the characteristics of the assets, but also on a number of other factors: timing of sale, level of demand. The more opportunities there are for the implementation of an object, the higher the coefficient will be. As the ratio increases, the liquidation value also increases.

Nuances when determining drugs

When establishing the liquidation value, two main errors are observed: overestimating or underestimating the price. In the first case, the asset will not be purchased, which will lead to problems. For example, the inability to pay off debts. In the second case, the company will not receive the profit that it could have received.

So.
Liquidation value is the valuation of an asset for sale within a short period of time. Its definition is divided into a number of stages, during which the question of the feasibility of implementation is resolved. The LP is calculated based on a formula that includes the market value of assets. The assessment results depend on many factors, including the technical characteristics of the object, the demand for it, and the time allotted for implementation.

In order to have an idea of ​​what liquidation value is, it is necessary to determine what market value is.

Market value is understood as the total value of the object at which it is alienated, without taking into account temporary circumstances that contribute to a decrease in price.

When setting a market price, the seller and buyer act in mutual agreement; they enter into an agreement that represents their common interests. In this situation, payment for the goods is carried out by transferring money to the account.

Market price disruption entails other types of value. When selling, it is important to know what type of value the object will be sold. If an entrepreneur clearly has a goal to acquire profitable property, in this case there may be investment value. The purpose of purchasing a product or real estate is to accumulate funds in the future. It is this fact that does not allow us to consider the price as market price. Liquidation value arises if certain factors are significantly affected and the time period for sale is limited. In other words, this is a forced, reduced price.

When does salvage value arise?

This type involves the sale of objects in order to pay creditors for existing debts. In frequent cases, it happens that the goods sold cannot cover all debts. It is important to get rid of assets as quickly as possible and use funds to pay off debt. The time factor plays a key role here.

In each individual case, there are different deadlines for implementation. The decision to liquidate a legal entity can be forced or voluntary. If the liquidation is voluntary, this allows you to develop more concepts regarding sales, draw up an optimal implementation schedule, and plan your actions in more detail. - the property of the debtor, which is sold at auction within the prescribed period.

The liquidation value of the goods is aimed at paying off the debt in the shortest possible period. Initially, pledged property provides certain guarantees to creditors. It is important to know at what price it will be sold and when the payment can be made. Liquidation value is also called “collateral value”.

If the property is sold due to forced liquidation in a short time, in this case the liquidation value is also determined. Forced sale is carried out on the basis of the current legislation of the Russian Federation. The debtor's pledged properties must be sold within 2 months from the time they were seized. In all cases, the liquidation value is significantly lower than the market value. For the buyer, this fact is extremely beneficial, but the seller bears losses.

Estimation of liquidation value and its factors

It is important to take into account all the reasons that determine the liquidation value. They do not depend on the situation at the enterprise. Exposure period is one of the main factors that turns the market price into a liquidation price. The shorter the period for selling property, the lower its value. The time factor can be called decisive in determining the liquidation value. The attractiveness of an object for investment includes the characteristics of the product and its functionality.

In some cases, the market price may be inflated. In this regard, buyer demand for the product decreases, and there are fewer of them. The price of certain objects may depend on the general market conditions. If this period lasts a long time, the company has more chances and time to analyze the situation. It is important to conduct a competent marketing policy, carry out appropriate activities and use available means to increase prices.

Liquidation assessment, what difficulties may arise?

The main problem is the time limit for the sale of real estate or other property. Registration of property rights is a rather lengthy and painstaking process. Narrowing the circle of buyers is also one of the main problems. When a revaluation of an enterprise's income occurs, 3 methods can be used. Profitable - implying benefits in the future. Comparative - based on the price of the property sold on the open market. Costly - built on determining costs. It is important to know which method is relevant when determining the liquidation price. The assessment of the liquidation value of an enterprise is carried out in a short period of time, and there is no opportunity to convey to buyers information about the advantages of the assets. In order to finally approve the price, the results of all analyzed approaches should be compared.

How is the transition from market price to liquidation price accomplished?

When calculating, in particular liquidation, the question arises of how the price of a product or real estate item changes and moves from the market price. Liquidation value is based on a comparative approach that involves statistical modeling. This method may be limited for one reason: the difficulty of making information available in a timely manner. Indirect is a method that allows you to directly compare 2 types of value. In this case, liquidation directly depends on the market one.

It is also important to know how the forced sale discount is determined. To do this, first compare the price of the product under normal conditions, and then in a short time. The expert method is the most famous. It is popular due to limited information. If there is a forced sale, the discount can be up to 50%. However, it also depends on the conditions of liquidation. It is important to analyze the liquidation value of the valuation object in order to quickly sell the property and make an early decision on the price of objects in the process of liquidating the organization. At the same time, an analysis of the financial condition is carried out. Ultimately, a decision is made regarding the procedure and timing of the auction.

If a company buys assets at a reduced price, it undoubtedly brings benefits. The owners may have plans to implement them in the future. It is possible that the assets will be sold at a standard price and thus generate a profit. In order to properly carry out liquidation, it is necessary to attract specialists who can calculate the liquidation price in the shortest possible period.

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