Simple English definitions for legal terms
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Net Realizable Value: Net Realizable Value is a term used in accounting to determine the expected cash amount from the collection of customer balances or the selling price of inventory after completion and disposal costs are deducted. It is also an accounting method that considers the value of scrap or by-products as a reduction in the cost of primary products.
Definition: Net realizable value refers to the amount of cash that a company expects to receive from the sale of its inventory or the collection of its accounts receivable. It is calculated by subtracting any costs associated with completing and disposing of the inventory or collecting the receivables from the selling price.
Examples:
These examples illustrate how net realizable value is calculated by subtracting any costs associated with completing and disposing of inventory or collecting accounts receivable from the selling price. This calculation gives a more accurate picture of the value of these assets to the company.