Going Concern Value - Explained
What is a Going Concern Value?
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Table of ContentsWhat is a Going-Concern Value?How does a Going-Concern Value Work?Some Examples of Going-concern Value
What is a Going-Concern Value?
The going-concern value of a company is defined as the company's value as an on-going business. It can be contrasted to the value of the business assets if they were sold.
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How does a Going-Concern Value Work?
Goodwill is the difference between a company's liquidation value and going-concern value. Goodwill is made up of a intangible assets, such as customer loyalty, trademarks and brand name to mention but a few. All things being equal, the going-concern value will always be greater than the liquidation value because the purchase value of a company is added to the going-concern value of that company.
Some Examples of Going-concern Value
Assume the liquidation value of a Widget corporation is 10 million USD (includes the value of the company's building, the current value of the company and other important value assuming the company is totally liquidated). The going-concern value of the Widget corporation company could be 60 million USD because the company's overall value depends on it patent and associated rights, and is ability to make money through future cash flows.