Net liquidating value
Portfolio Margining accounts reporting net liquidating equity below USD 100,000 are limited to entering trades which serve solely to reduce the margin requirement until such time as either: 1) the equity increases to above 100,000 or 2) the account holder requests a downgrade to Reg T style margining through Account Management (select the Trading Access and then trading Configuration menu options).If a Portfolio Margining eligible account reporting net liquidating equity below USD 100,000 enters an order which, if executed, would serve to increase the margin requirement, the following TWS message will be displayed: "Your order is not accepted, margin requirement increase not allowed.
This approach is similar to the book valuation method, except that the value of assets at liquidation are used instead of the book or market value of the assets.The problem is it consists of different items when acquired for each company.The main item we are all familiar with is goodwill.This value includes the liquidation value of a company's tangible assets as well as the present value of its intangible assets (such as goodwill). This sum represents the current value of inventory, buildings and other tangible assets that can be sold assuming that the company is completely liquidated.The going-concern value is worked into the purchase price of a company, and is the main reason why the purchase price of a company tends to be higher than the current value of the assets of the company. However, Widget Corp.'s going-concern value could very well be $60 million, as the company's reputation of being the world's leading widget producer and its ownership of patents and associated rights for widget production mean that the company should have a large steady stream of future cash flows.First, unless you audit the business' books, you cannot be certain that the numbers presented are correct.
Secondly, the value of some assets, such as buildings, equipment and furniture/fixtures, may be overstated on the books, and may not reflect the maintenance and/or replacement costs for older assets.
This form of valuation is based on the books of a business, where owners' equity total assets minus total liabilities is used to set a price.
There are a couple of problems with this simplified approach.
As a result, some business valuation experts will use an adjusted book value.
Using the Tangible Book Value, intangible or soft assets are deducted from the total assets.
If you want to be more conservative, I guess Z=.5 is the safer number for receivables as well.