A firm's liquidation value is the amount:
A)necessary to repurchase all shares of common stock.
B)realized from selling all assets and repaying debts.
C)a purchaser would pay for the firm in bankruptcy.
D)equal to the book value of equity.

Question

Quizplus · Accepted Answer

Liquidation value refers to the value of a company's assets when they are sold off and debts are paid. Therefore, the correct choice is B. Choice A is incorrect because repurchasing shares of stock is not related to the liquidation value. Choice C is also incorrect because the purchase price in bankruptcy can be influenced by factors beyond just the liquidation value. Choice D is incorrect because book value reflects the historical cost of assets minus liabilities and is not necessarily the same as the liquidation value.

A Firm's Liquidation Value Is the Amount