Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated August 5, 2020

What is Net Realizable Value (NRV)?

The net realizable value (NRV) of an asset is the money a seller expects to receive for the sale of an asset after deducting the costs of selling or disposing of the asset.

How Does Net Realizable Value (NRV) Work?

Let's assume Company XYZ needs to get rid of a widget maker. It expects to sell the asset for $10,000. It must pay a broker $600 for help in the sale, $50 in legal paperwork costs and $200 to deliver the asset to the buyer. Thus, Company XYZ's net realizable value on the asset is:

$10,000 - $600 - $50 - $200 = $9,150

Analysts sometimes incorporate the future cash inflows associated with the assets and calculate the present value of the cash inflows and outflows in order to determine NRV.

Why Does Net Realizable Value (NRV) Matter?

NRV is utilized when using the lower of cost or market (LCM) method of inventory accounting. It is also used when trying to calculate how much of a company's accounts receivables are truly expected to turn into cash (that is, when determining bad debt expense).

Ask an Expert about Net Realizable Value (NRV)
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Net Realizable Value (NRV).
Be the first to ask a question

If you have a question about Net Realizable Value (NRV), then please ask Paul.

Ask a question

Read this next

Don't Know a Financial Term?
Search our library of 4,000+ terms
 - profile
Ask an Expert about Net Realizable Value (NRV)

By submitting this form you agree with our Privacy Policy

Share
close