Liquidation value refers to the value that can be realized by realizing assets under certain conditions. This value concept is mostly used in bank mortgage loans to estimate the value of low-pressure properties. Typically banks require a settlement value to define the value of the collateral as the basis for a secured loan. If the lender fails to repay the principal and interest on time, the mortgaged assets will be sold. In judicial proceedings, the settlement value is often used by creditors to apply for enforcement against the debtor's assets. In addition, investors sometimes need to conduct a liquidation analysis on declining companies to determine potential risks.
Since the assets acquired and disposed of by asset management companies come from banks' non-performing loans, the evaluation of such assets is for the purpose of realizing them. Therefore, introducing the concept of liquidation value and its method will help achieve its evaluation purpose.
1. Renewal value and realizable value
1. Renewal value
The continued value of machinery and equipment is the value of the asset user, and it depends on The contribution of an asset to the product produced. For example, in a normally operating enterprise, a CNC machining center is only one generation behind the latest machining center. After improvements to the CNC system, its functions are exactly the same as the latest products. At this time, to the user, its value is exactly the same as that of the most advanced machining center (if physical depreciation is not considered). Appraisers generally use the market price of the latest equipment and take into account freight, installation fees, etc., that is, update the replacement cost as the fair market value of the equipment if it continues to be used in the same place.
2. Realizable value
The realizable value is the exchange value that the machine and equipment can realize under certain conditions. If the above-mentioned processing center is used for cash, the monetary value that can be realized is often lower than its continued value, which is mainly determined by market supply and demand. In the early 1990s, due to the strong demand for machine tools due to the development of the processing industry in my country, the prices of many second-hand machine tools were higher than the prices of new equipment.
2. The basic concept of liquidation value
Liquidation value is a kind of realizable value with mandatory conditions, and it has the following three concepts.
1. Quick settlement value
Quick settlement value is also the auction value, which is mandatory for quick realization. All equipment sales are based on a single unit, and the transaction is completed at that time and in the local area; any unknown costs, such as installation and commissioning costs, transportation costs, etc., are not taken into account; the buyer is responsible for the dismantling and relocation of the purchased equipment and bears the risk. Quick settlement value usually does not include added value, such as: products that can be produced, existing installations, manufacturing licenses, trademarks, customer lists, sustainable operations and other factors.
2. Orderly liquidation value
Orderly liquidation is still a forced sale. The difference from rapid liquidation value is that all equipment must be sold within a certain time in the future. This allows the liquidator to have time to advertise and bargain, find an appropriate buyer, and obtain a more reasonable selling price.
3. In-situ reuse settlement value
In-situ reuse settlement value means that due to business failure of a certain enterprise, its production equipment must be forced to be sold. However, the cause of business failure is caused by management, not external economic forms, market and other factors. Replacing a new management team can make the company profitable.
This value concept is mostly used in chemical, steel and other types of enterprises. The equipment installation costs of these enterprises are very high, the equipment has poor versatility, is difficult to disassemble, and has extremely low possibility of realizing cash in the market. In this case, the proceeds from quick repayment and orderly repayment are also very small. However, the use of this value concept is also accompanied by high risks, because the prerequisites for using this value concept are: first, the failure of business operations is indeed caused by management factors; second, there is a certain number of famous brands in the market. A potential purchaser of the business as a going concern. Otherwise, the realized value cannot be realized.
3. Evaluation methods of liquidation value and orderly liquidation value
The rapid liquidation value of equipment is based on auctioned equipment as the market. The evaluation of rapid liquidation value and orderly liquidation value of equipment generally adopts the market comparison method. The difference is that is the market reference, and the orderly liquidation value uses the equipment in the second-hand equipment trading market as the market reference. The calculation formula is:
Quick settlement value = auction price of the reference object or: Quick settlement value = Orderly settlement value = Selling price adjustment coefficient of the reference object
Or: Orderly settlement value =
Appraisers need to pay attention to the following aspects:
First, the settlement value obtained by selling the same equipment at auction is different from that obtained by selling it on the second-hand equipment trading market. Appraisers should pay attention to the differences in the reference market when assessing settlement value and orderly settlement value.
Second, try to select similar equipment as a reference. The equipment used as a reference is in the same industry, or a very similar industry.
Third, if there is a lack of market data, equipment transaction data from other industries can also be used as a reference, but the relationship, similarities and differences between the two industries must be analyzed.
Fourth, when using data from the second-hand equipment market to determine the orderly settlement value, attention should be paid to understanding the second-hand equipment sales cycle. Because orderly liquidation generally has liquidation time requirements, if the liquidation time is different from the sales time of the equipment in the second-hand equipment market, adjustments need to be made.
Fifth, the ratio of the price of the old equipment (auction price or transaction price of second-hand equipment) to the replacement cost of the new equipment is an important parameter often used when Pinggu pays off its value, which is called orderly liquidation and realization. coefficient.
Sixth, the adjustment coefficient in the formula mainly considers the comparison factors between the Pinggu object and the market reference object, including four categories: individual factors, transaction factors, regional factors and time factors.
1. Individual factors. The individual factors of the equipment mainly include: ⑴Equipment specifications and models. Evaluators should select market references with the same specifications and models. ⑵Equipment manufacturers. The manufacturing quality of equipment produced by different manufacturers is different, and the market prices are also quite different. Evaluators should choose equipment produced by the same manufacturer as a market reference. ⑶The service age of the equipment. The manufacturing age of machinery and equipment has a greater impact on the selling price. The reference object should be made in the same era as the evaluation object as much as possible. ⑷How to install the equipment. How the equipment is installed will have an impact on the price at which the equipment is sold. Two identical pieces of machinery and equipment are intended for sale for off-site use. One has been disassembled and shipped to the buyer's destination for use. The other piece of machinery and equipment has not been dismantled, and the disassembly and transportation costs of the equipment are paid by the buyer. The sales prices of the two pieces of equipment are different. ⑸Accessories of equipment. The accessories of the same equipment may be different, and the accessories of some equipment account for a large proportion of the value of the whole machine. The evaluator should compare the attachment conditions of the reference object and the object of evaluation. ⑹The physical status of the device. The physical state of the equipment has a great influence on the selling price. Equipment from the same manufacturer and the same date of manufacture will have great differences in the physical state of the equipment due to different factors such as the environment, load, and operator level. The appraiser should compare the physical status of the appraisal object and the reference object.
2. Transaction factors include: ⑴Market conditions. Mainly refers to the supply and demand relationship in the market. When appraisers use the market comparison method, they should first understand whether the equipment being evaluated is currently a buyer's market or a seller's market, and determine its possible impact on the value of the equipment. ⑵Transaction motivation and background. Different transaction motivations and transaction backgrounds will have an impact on the sale of equipment. ⑶Transaction quantity. The number of transactions for purchasing equipment is also an important factor affecting the selling price of equipment.
3. Time factor. The market supply and demand relationship, price levels, etc. will be different at different trading times. Appraisers select transaction cases that are close to the evaluation base date and make adjustments to the time influencing factors of the reference objects.
4. Regional factors. Due to differences in market supply and demand conditions in different regions and other factors, the transaction price of equipment is also affected, and the evaluation reference object may be in the same region as the evaluation object. If there are regional differences between the assessment object and the reference object, adjustments need to be made.
IV. Evaluation method of in-situ reuse settlement value
Under certain restrictions, the evaluation method of in-situ reuse settlement value should be adopted for the evaluation of machinery and equipment. These constraints include: the business failure of the enterprise is caused by poor management, the products produced by the enterprise have good market prospects, and the production capacity of the enterprise's assets is good, etc. The concept of in-situ reuse settlement value is very close to the concept of renewal value. In-situ reuse settlement value is generally determined based on the renewal value, taking into account an appropriate adjustment coefficient. The formula is as follows:
In-situ reuse settlement value = renewal value The adjustment coefficient in the formula should be determined by the appraiser after a comprehensive analysis of the following factors.
1. Repayment time. All repayment times are mandatory to a certain extent, and the allowed repayment time is the main factor affecting the repayment value. If an asset requires repayment within a month, the liquidator has limited time to advertise, find a buyer, or bargain, which means it must be repaid at a very low price.
2. Attractiveness of the industry. The repayment value of in-situ reuse is greatly affected by the economic conditions of the industry, because this value concept is mostly used in some specific industries, and the machinery and equipment can also adapt to these specific products and processes. The industry is in the development period, and the selling price of the equipment is relatively high. ; When the industry is in recession, the price of equipment will be low. General equipment is less affected by the industry.
3. Potential buyers. The number of potential buyers directly affects the intensity of competition and is also an important factor affecting the settlement value of in-situ reuse.
4. Geographical location. The geographical location of the enterprise, the economic development level of the region, transportation convenience, market size and other factors will have an impact on the operation of the enterprise.