CFA Practice Question
The liquidation value of a company is
B. always more than its going concern value.
C. normally less than its going concern value.
A. always less than its going concern value.
B. always more than its going concern value.
C. normally less than its going concern value.
Correct Answer: C
The going concern value is normally higher than the liquidation value of a firm. However, this is not always true as some firms are better dead than alive.
User Contributed Comments 5
| User | Comment |
|---|---|
| thekapila | Here is why: If profitable: Liquidation < going concern as firm is engaging in profitability by putting resources. If dying: Liquidation > going concern as no point in engaging capital in negative return project. |
| Roy1 | Nice One! |
| coquin22 | understandable |
| ashish100 | "some firms are better dead than alive" |
| jejemike | Interesting.. so a firm can be worth more dead than alive |