Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is meant by salvage value in financial terms?

1. The projected value of a business at its peak

2. The value of an asset at the end of its useful life

3. The market value of products sold

4. The cost incurred for disposal of assets

The correct answer is: The value of an asset at the end of its useful life

Salvage value refers to the estimated residual value of an asset at the end of its useful life, after accounting for depreciation. This value represents what an asset is expected to sell for once it is no longer in service or no longer useful to the business. It is important for businesses when calculating depreciation and making investment decisions, as it impacts the total cost of ownership of an asset. Understanding salvage value helps in accurately forecasting financial performance and determining the return on investment. The other options do not accurately capture the definition of salvage value. The value of a business at its peak does not relate to the ending worth of an individual asset. The market value of products sold pertains to the revenue generated from selling goods, which is separate from an asset's end-of-life value. Additionally, the cost incurred for disposal of assets focuses on expenses associated with asset removal rather than its recoverable worth after it has outlived its usefulness.