Liquidation Value

This approach to valuation of shares is based on the liquidation value per share (LVPS).


If the total assets of Alert Ltd can be liquidated for Rs 52.5 crore, its LVPS = (Rs 52.5 crore - R.. 45 crore) + 10,00,000 = Rs 75. The minimum value of the firm would be Rs 75 per share. The LVPS is a more realistic measure than book value, But it ignores the earnings power of the assets of the firm. Moreover, it is difficult to estimate the liquidation value of a going concern. For these reasons, the LVPS is also not a true proxy of the true investment value.

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