Going-Concern Value Definition - Investopedia going-concern value definition going concern value
Will has 10 years of experience as a writer and editor.Investopedia's anxiety index was developed by him.He's an expert on investing laws and regulations.Will received a Bachelor of Arts in literature and political science from Ohio University.He received a masters degree in economics from The New School for Social Research.His Doctor of Philosophy was earned at New York University.
It is assumed that the company will remain in business indefinitely and continue to be profitable.The total value is also known as going concern value.The value is different because an ongoing operation has the ability to continue to earn a profit, which contributes to its value.Unless there is a good reason to believe that the company will go out of business, it should always be considered a going concern.
Goodwill is the difference between a company's going-concern value and its liquidation value.intangible assets include company brand names, trademarks, patents and customer loyalty.The going-concern value is usually more than the liquidation value.The purchase price is usually based on the company's going-concern value.This means that a company being acquired can charge a pricing premium that is higher than the value of its assets and takes into account its future profitability, intangible assets, and goodwill.
The going-concern value of a company is usually higher than the liquidation value because it includes intangible assets and customer loyalty.The company may have to sell off its tangible assets at a deep discount in order to stop operations.Equipment, unsold inventory, real estate, vehicles, patents and other intellectual property are examples of tangible assets that might be sold at a loss.
When investors feel a company no longer has value as a going concern, and they want to know how much they can get by selling off the company's tangible assets and such of its intangible assets as can be sold, liquidation value is usually applied.A company or investor that is acquiring a company may compare its going-concern value to its liquidation value in order to decide if it is financially worthwhile to continue operating the company.
Liquidating a company means laying off all of its employees, and if the company is viable, this can have negative ramifications for the investor who made the decision to liquidate a healthy company.A bad reputation can be given to an investor by liquidating a going concern.
The value of the company is $10 million.If the company is completely dissolved, the current value of inventory, buildings and other tangible assets can be sold.The company should have a large and steady stream of future cash flows as it has a reputation of being the world's leading producer ofwidgets.