Net Realizable Value Calculator

Formula

The formula to calculate the Net Realizable Value (NRV) is:

\[ NRV = SP - COGS - E \]

Where:

$ NRV $ is the Net Realizable Value ($)
$ SP $ is the Selling Price of the inventory ($)
$ COGS $ is the Cost of Goods Sold ($)
$ E $ is the Estimated Selling Expenses ($)

What is Net Realizable Value?

Net Realizable Value (NRV) is a financial metric used to determine the estimated selling price of an asset, minus any costs associated with the eventual sale or disposal of the asset. NRV is commonly used in inventory valuation to ensure that inventory is not overvalued, reflecting potential losses from items that may not be sold at their full value. It provides a conservative estimate, offering a worst-case scenario for the asset's value.

Example Calculation

Let's consider an example:

Selling Price (SP): $10,000
Cost of Goods Sold (COGS): $6,000
Estimated Selling Expenses (E): $1,500

Using the formula to calculate Net Realizable Value:

\[ NRV = 10000 - 6000 - 1500 = 2500 \, \text{\$} \]

This means that the Net Realizable Value of the inventory is $2,500.