This just means the value of the company if it were to liquidate now. The value of this is dervied by the market realisable value of the assets minus off liabilities. Intangible assets are often excluded since the these assets may not bring in much tangible value and the process of selling it could be much longer and troublesome. In some instances, expenses related to liquidation may be included in the calculations as well.
You would most likely perform such valuation for distressed companies and those that are on the brink of bankruptcy. Some analysts may also perform such valuation as a comparison for other forms of valuation such as the DCF. This form of valuation is more of a worse-case scenario analysis.
Some drawbacks about this form of valuation is that it doesn't take into account non-financial as well as market information, that often should be included in valuation.
This just means the value of the company if it were to liquidate now. The value of this is dervied by the market realisable value of the assets minus off liabilities. Intangible assets are often excluded since the these assets may not bring in much tangible value and the process of selling it could be much longer and troublesome. In some instances, expenses related to liquidation may be included in the calculations as well.
You would most likely perform such valuation for distressed companies and those that are on the brink of bankruptcy. Some analysts may also perform such valuation as a comparison for other forms of valuation such as the DCF. This form of valuation is more of a worse-case scenario analysis.
Some drawbacks about this form of valuation is that it doesn't take into account non-financial as well as market information, that often should be included in valuation.