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Becoming Familiar with the Different Types of Liquidation Value
Becoming Familiar with the Different Types of Liquidation Value
September 10, 2019

When it comes to equipment appraisal, it is important you become familiar with the valuation methods that appraisers employ throughout the industry.

 

Discussions with your appraiser consistently occur in order to find the best valuation method for your goals. It is therefore important you have a basic understanding of the concepts involved in liquidation.

 

Once your assets have been sold off and existing charges paid off, the net amount a business is left with is deemed their liquidation value, assuming business operations are discontinued.

 

What Are the Costs Associated with Liquidation?

In order to successfully determine a liquidation value, associated costs, such as the following, should be taken into consideration:

 

  • Accounting costs
  • Disposal taxes
  • Administrative costs
  • Commissions

 

As part of the costs for your equipment appraisal, it is important to consider the future cash value and flow; liquidation is not an instantaneous procedure. This concept is known as the time value of money, where valuations are adjusted in order to better meet the timeframes of liquidation.

 

Liquidation Types

Liquidation values are often broken down into two methods, forced liquidation, and orderly liquidation. Let us take a deeper look into how they are differentiated:

 

Forced Liquidation

This is applied when the search for a procurer of assets for a business cannot be satisfied within an allotted time, typically as a result of a situation where the assets are to be sold within a short timeframe, ≤3 months in general.

 

In most cases, forced liquidations do not occur from the business owners themselves. This is because a forced liquidation does not easily allow for the required amount of time to plan and achieve the best market value; a situation that is incongruent with the maximised amount business owners wish to receive.

 

Orderly Liquidation

In stark contrast to the small timeframe allotted within a forced liquidation, orderly liquidations, as the name implies, is the value a business can expect to receive when a longer planning period is available by sourcing an optimal buyer for the assets in question. Orderly liquidation valuations are based off what the market is currently paying for assets that show similar signs of depreciation.

 

Variances naturally occur due to the extensive differences between business assets, however, planning for orderly liquidations are known to be ≥3 months.

 

Who Conducts Certified Equipment Appraisal?

The holistic asset valuation services we have been providing at Infinity Asset Solutions for over 85 years has allowed us to retain certified appraisers that deliver comprehensive equipment appraisal reports – meaning you’re never left out of the discussion.

 

We help you reach the return-on-investment that you desire due to our consistent involvement in auction and liquidation environments, allowing us to keep our ear on the pulse of the valuation for your equipment at any point in time. Get in touch with one of our representatives to discuss your appraisal needs!

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