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Fair Market Value (FMV)
The price that an asset would sell for on the open market, often used as a standard in valuations during M&A due diligence.
Implications
The estimated price at which an asset would change hands between a willing buyer and seller, both having reasonable knowledge of the relevant facts and neither under compulsion to buy or sell, often used in appraisals, taxation, and legal contexts.
Example
Example: An estate appraiser determines the fair market value of a property based on recent comparable sales in the area, ensuring a fair price for both the buyer and seller in the transaction.
Related Terms
Different from book value, which is the value of an asset as recorded on the balance sheet, FMV reflects the current market conditions and what a willing buyer would pay.
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