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Sabtu, 01 Juni 2013

What Is Liquidation Value?

Liquidation value is often referred to as fair market value. It is the value of an asset that is reflective of immediate sale. As a result, the value may be lower or higher than the real value. Liquidation value is used with investments, including stock, bond and mutual fund portfolios as well as in real estate, often when getting a loan refinanced. Liquidation value is also used when valuing a business to prepare it for sale. Ultimately the liquidation value is what any assets warrants as a price in a current sale.

Stocks

    When investors receive statements as to the price of their stock portfolio, they are looking at the liquidation value of the date of the statement. At any given moment during the trading day, the liquidation value may greatly fluctuate depending on news, supply and demand.

Bonds

    Statements for bonds will be similar to stocks with a fair market value that is the worth of the bond if sold at market. Unlike stocks, bonds have a maturity date which makes a liquidation value moot if held for the duration of the term.

Real Estate

    Real estate fluctuates with interest rate fluctuations, market demand and economic trends. When refinancing or applying for home equity loans, the liquidation value is considered to give the best snapshot of the current worth of the property as collateral.

Business

    Businesses compute their liquidation value based on their assets and annual revenues. They can use the liquidation value to obtain loans or determine a price for buyout of partners in part or whole.

Estate Execution

    When estates are executed after the grantors die, a certain amount of liquidity is required to pay taxes, debts and execution costs. If estates do not have enough cash to pay this, any and all assets may be liquidated at fair market value or less to fund the estate quickly eroding the estate's value.

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