Glossary

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Forced Liquidation Value

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Forced liquidation value, in accounting and valuation, refers to the estimated amount of money that could be realized from the sale of an asset or a group of assets under the assumption that the sale is conducted under compulsion, with a limited time frame, and with the objective of selling the assets as quickly as possible. In essence, it represents a “fire sale” scenario where the seller is under pressure to sell quickly, often resulting in a lower price than the fair market value. Forced liquidation value is often used in financial analysis, asset-based lending, and bankruptcy proceedings. It serves as a conservative estimate of the value of assets when there is a need to quickly convert them into cash. However, it’s important to note that forced liquidation value is typically lower than other types of asset valuation, such as fair market value or orderly liquidation value, which may allow for a more orderly and less rushed sale process.

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