Net Realizable Value

Net Realizable Value also called Liquidation Value or Adjusted Book Value. Net realizable value is defined as realizable value of all assets after deduction of liquidation expenses and paying off liabilities.

Although in some case liquidation expenses can be ignored if business of target company is acquired as a going concern.

Though in some case liquidation expenses can be ignored if business of target company is acquired as a going concern.

In other words , the price at which assets can be sold less reasonable estimate of the costs associated with that sale or disposal.

Further, this method is not so popular as it involves total break up of the target company. This method is generally useful where the acquirer is interested in selling one part of business. And integrate remaining part of the business with the existing operations.

In the below example we see that the realizable values are different as compared to the book values:

Thus, total net realizable assets of the net book value of ₹100,000 in the above example would ₹105,000 and if there are 5000 equity shares then the value of per share will be ₹21.