Meaning & use
net realizable value
Last updated
Meaning
noununcountablebusinesstechnical
The amount a business expects to receive from selling an item, after subtracting the costs of finishing and selling it.
Grammar: Usually uncountable, with no article: inventory is valued at net realizable value.
Patterns
- net realizable value of something
- at net realizable value
The net realizable value of the unsold coats was lower than what the store paid for them.
Inventory must be reported at the lower of cost and net realizable value.
We estimated the net realizable value by subtracting shipping and sales commissions from the expected price.
Common combinations
- estimate net realizable value
- The auditor asked us to estimate net realizable value for each product line.
- calculate net realizable value
- To calculate net realizable value, start with the expected selling price.
- lower of cost and net realizable value
- Stock is recorded at the lower of cost and net realizable value.
- net realizable value of inventory
- The net realizable value of inventory fell after prices dropped.
- fall below net realizable value
- If cost falls below net realizable value, no write-down is needed.
Synonyms and how they differ
- expected sale value
- This everyday phrase describes the selling price in general, but it does not deduct selling costs the way net realizable value does.
- fair value
- Fair value is a market-based price between willing parties, while net realizable value is specific to the seller and deducts costs of sale.
Word family
- net adjective
- remaining after deductions
- realize verb
- to turn into actual money
- realizable adjective
- able to be turned into cash
- write-down noun
- a reduction in recorded value
Commonly confused: net realizable value or market value?
net realizable value vs market value
Market value is the price an item would fetch in the market. Net realizable value starts from the expected price but subtracts costs to complete and sell.
Practice
A shop expects to sell a sofa for $900, but it must spend $100 on delivery and fees. What is the net realizable value?
Choose one answer.
Net realizable value is the expected selling price minus costs of sale: $900 minus $100 gives $800. The full price of $900 ignores those costs.
Make it your own
Write a sentence using “net realizable value”, then check it and compare it with the examples above.