What is Exit Value in Accounting?

Exit value is the proceeds if an asset or business were to be sold. This estimated amount is considered to be most reliable if the proceeds are derived from an independent third party in an arm's length transaction where the sale is not rushed. Exit value is used in the determination of fair value for assets.

For example, a company owns a piece of machinery that it no longer needs. The machinery's exit value is determined based on its fair market value in its current condition, assuming it will be sold in an orderly transaction. If the market analysis indicates that the machinery could be sold for $50,000 to a willing buyer in the market, then its exit value is $50,000. This value reflects the price that the company could realistically receive if the asset is sold, considering market conditions and other factors like costs to sell or transportation.

What is Exit Value in Finance?

Exit value also refers to the amount that a venture capital or private equity investor would realize from the sale of an investment, such as a business. This exit value usually arises from a liquidity event, such as from the sale of the business or by taking it public. The payout received from this event is considered the exit value for the investor.