Terminal value, liquidation (`tv.liquidation`)¶

Returns the net liquidation value at the horizon N: the realisable values of the assets, less the liabilities settled, the costs of the liquidation and the tax on the gains realised. Use it for ventures without continuity after N or with separable assets. Every line appears in explain with its label, so the value can be audited line by line. The basis is a required input: equity when the liabilities listed include financial debt (the value is an equity value), enterprise when they exclude it (an enterprise value); there is no default.

Formula¶

\[ TV_N = \sum \text{realisable values} - \sum \text{liabilities} - \sum \text{liquidation costs} - \text{tax on gains} \]

The result is negative when the liabilities and costs exceed the realisable values; it is returned as is, with no floor at zero, and the convention says so.

Example¶

from decimal import Decimal

import fairmark as fm

r = fm.tv.liquidation(
    assets={"Land": 800, "Plant": 300, "Receivables": 200},
    liabilities={"Bank loan": 600, "Suppliers": 250},
    liquidation_costs={"Legal fees": 40, "Closure": 60},
    tax_on_gains=30,
    basis="equity",  # the bank loan is listed: an equity value
)
assert r.terminal_value == Decimal("320")
assert r.total_liabilities == Decimal("850")
for step in r.steps[:3]:
    print(step.label, step.value)  # Assets: Land 800, Assets: Plant 300, Assets: Receivables 200

# Lists of (label, amount) pairs are accepted too
pairs = fm.tv.liquidation(
    [("Lot", 500), ("Lot", 300)], [("Suppliers", 100)], [], 0, basis="enterprise"
)
assert pairs.terminal_value == Decimal("700")

Inputs¶

Field	Meaning	Default
`assets`	List of `{label, value}`: realisable value at N of each asset, zero or positive	required
`liabilities`	List of `{label, value}`: amount settled at N, zero or positive	required
`liquidation_costs`	List of `{label, value}`: legal fees, closure, severance, zero or positive	required
`tax_on_gains`	Tax on the gains realised, as an amount, zero or positive	required
`basis`	`enterprise` (financial debt not listed) or `equity` (financial debt listed)	required, no default

assets needs at least one line; the other lists may be empty. Labels must not be empty.

Outputs¶

Field	Meaning
`terminal_value`	Net liquidation value at N, not discounted
`total_assets`	Sum of the realisable values
`total_liabilities`	Sum of the liabilities
`total_liquidation_costs`	Sum of the liquidation costs
`tax_on_gains`	Tax on gains, as given
`basis`	`enterprise` or `equity`, as declared

Conventions (explicit, reported in `explain.conventions`)¶

Convention	Options	Default
Timing	assets realised and liabilities settled at N	fixed
Tax on gains	given as an amount	fixed: not computed from a rate
Negative net value	returned as is	fixed: no floor at zero
Basis	enterprise or equity, declared; the liabilities listed must match it	none: must be given

Errors¶

Code	When
`FM-E001`	`assets` is empty, a label is empty, `basis` is missing or not `enterprise` or `equity`, or a field is missing or unknown
`FM-E018`	An asset value, a liability, a liquidation cost or the tax on gains is negative
`FM-E008`	Arithmetic overflow (inputs far outside a realistic range)

Accuracy¶

Additions and subtractions of the given amounts: exact.

Verified against¶

Golden cases in tests/golden/tv.liquidation/, with the sum written out in each file and recomputed by an independent script (scripts/reference_tv.py).

Terminal value, liquidation (tv.liquidation)¶