When it comes to company valuations, there is a distinct difference between the valuation of a company in restructuring or liquidation and the valuation of a going concern. It’s important for business owners and potential investors to understand this difference in order to make informed decisions about the future of their business.

The valuation of a company in restructuring or liquidation takes into account the current liabilities and assets of the company. This is known as “liquidation value” because it is the amount of money that can be realized from the sale of the company’s assets. It is usually lower than the market value since some of the company’s assets may no longer be of value due to the financial difficulties the company is facing.

On the other hand, the valuation of a going concern takes into account the potential future liabilities and assets of the company and factors in the future earnings potential of the business. This is known as “enterprise value” or “enterprise multiple” and is typically higher than the liquidation value since it factors in the potential future earnings of the company.

When it comes to company valuations, it is important to understand the differences between liquidation value and enterprise value. Liquidation value is what a company is worth after all of its assets have been sold and all of its liabilities have been paid off, while enterprise value is the estimated worth of a company based on its future potential. By understanding the differences between the two, business owners and potential investors can make better informed decisions about the future of their business.