Module II· Special Situations ValuationBasic
Question
What is the difference between going-concern value and liquidation value?
Answer
Going-concern value
value assuming the business continues — the standard DCF/comps output.
Liquidation value
value in a wind-down, selling assets individually — often materially lower.
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Liquidation = Σ asset sale proceeds (with discounts) − liabilities
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Typical asset discounts
- Inventory: 50–70% of book value
- Receivables: 80–90%
- Machinery: 30–50%
- Real estate: 70–90%
Interpretation
- Going concern > liquidation: the business creates value.
- Going concern < liquidation: the business destroys value; a wind-down is more rational.
Use cases
worst-case floor in distressed situations, recovery analysis for senior creditors.