Going-Concern Value

What Does Going-Concern Value Mean?
The value of a company as an ongoing entity. This value differs from the value of a liquidated company's assets, because an ongoing operation has the ability to continue to earn profit, while a liquidated company does not.

Investopedia explains Going-Concern Value
This value includes the liquidation value of a company's tangible assets as well as the present value of its intangible assets (such as goodwill). The going-concern value is worked into the purchase price of a company, and is the main reason why the purchase price of a company tends to be higher than the current value of the assets of the company.

For example, the liquidation value of Widget Corp. is $10 million. This sum represents the current value of inventory, buildings and other tangible assets that can be sold assuming that the company is completely liquidated. However, Widget Corp.'s going-concern value could very well be $60 million, as the company's reputation of being the world's leading widget producer and its ownership of patents and associated rights for widget production mean that the company should have a large steady stream of future cash flows.

Related Terms

Asset
Book Value
Goodwill
Intangible Asset
Liquidation
Tangible Asset
More Related Terms

Related Links

Can You Count On Goodwill? - We go over how to determine whether a measure of this important but hard-to-price intangible asset is justified.
Intangible Assets Provide Real Value To Stocks - Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
Introduction To Fundamental Analysis - Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
Advanced Financial Statement Analysis - Learn what it means to do your homework on a company's performance and reporting practices before investing.

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