Going Concern Value

Going Concern Value

See Also:
Valuation Methods
Value Drivers: Building Reliable Systems to Sustain Growth
Value Chain
Liquidation Valuation
Asset Market Value versus Asset Book Value

Going Concern Value Definition

The going concern value definition is the value of a company under the assumption that it will continue to operate for the foreseeable future. This is in contrast to liquidation value, which assumes the company is going out of business. The difference between going concern value and liquidation value consists of intangible assets and goodwill.
For example, if a well-known apparel company is a going concern, it can continue to sell its brand-name clothing at a markup for a profit. It would then be valued according to its going concern value. However, if the company is going out of business, it would have to sell off its assets – sewing machines, fabric, etc. – to pay creditors. The company would probably have to sell off its assets at a discount. In this case, the company would be valued according to its liquidation value.
When one company purchases another, the buyer typically pays more than the value of the target company’s assets. The price premium is due to the value of goodwill, or the value of the company as a going concern.

Going Concern Accounting Concept

The going concern accounting concept refers to the assumption that a company will continue to operate for the foreseeable future. This allows the company to include the value of intangible assets and anticipated profitability in its overall worth. Unless there is reason to believe a company is going out of business and ceasing operations, consider a company always to be a going concern.
going concern value, going concern accounting concept, Going Concern Value Definition

ARTICLES YOU MIGHT LIKE

The Struggles of Private Company Accounting

Hiring the right accountant  When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA.  That is because one thing that all Entrepreneurs have in common is that they must file a tax return.  So, from

Read More »

IN CRISIS? GET A STRATEGIC CFO! – CEO Blindspots Podcast

Friend of the firm, Birgit Kamps, recently had Strategic CFO President, Dan Corredor, as a guest on her podcast, CEO Blindspots. CEO BLINDSPOTS HOST: Birgit Kamps. She was speaking five languages by the age of 10, and lived in five countries with her Dutch parents prior to becoming an American citizen. Birgit’s professional experience includes starting

Read More »

SHRM calls ICHRA the 401K for Group Health Benefits

Fed-up with group health insurance? ICHRA is the new way to offer great health benefits and avoid ACA penalties, SHRM calls it the 401K for group health benefits.  In 2020 the Department of Labor, HHS and IRS changed the rules for employer health benefits. They changed the Affordable Care Act mandates and penalties for every

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

SHARE THIS ARTICLE

JOIN THE NEXT STRATEGIC CFO™ SERIES

Strategic CFO™ Financial Leadership Workshop
The Art of the CFO®

Days
Hours
Min
Sec

September 12-15th 2022