In the process of interaction of economic entities, it is often necessary to determine the liquidation value of an object. For example, when granting a loan against collateral, the collateral for the loan will depend on the accuracy of determining the residual value. When an enterprise is liquidated, it becomes necessary to determine the liquidation value of its assets.
Instructions
Step 1
Remember that resale value is the price at which an item can be sold on the open market with a reasonable lead time for a given type of property. In other words, it is a value that reflects the most probable price at which a given object can be sold during the object's exposure period, which is less than the typical exposure period for market conditions, given that the seller is forced to make a deal to sell the asset. Unlike the market value, the calculation of the residual value takes into account the influence of circumstances that force the seller to sell the object on terms that do not correspond to market conditions.
Step 2
Thus, when calculating the residual value, take into account three factors that will distinguish it from the market value: - limited time for the sale of property; - limited resources for the sale of property; - forced sale of property.
Step 3
The residual value is determined based on the market price of the property, taking into account a limited exposure period, i.e. the period from the beginning of the presentation of the object for sale until the conclusion of the transaction. It is the key to determining the residual value. After all, a long exposure period allows a large-scale advertising program to be carried out, which will attract a wide range of investors, which means the opportunity to set a higher price. And vice versa, when the exposure period is short, then the circle of buyers is limited, therefore, they will have to offer the property at a price that they cannot refuse, i.e. pretty low.
Step 4
Please note that in addition to the exposure period, the method of calculation also affects the residual value. The direct method is to compare the property being sold with a similar one. This method is quite simple and reliable. However, in modern conditions, it is not always feasible, since there is not enough information about forced sales. There is also an indirect method for determining the residual value. It is based on calculating the residual value through the market value, i.e. the amount of the forced sale discount is deducted from the market price. Usually it is 20-50% and is determined for each object individually.
