Difference between liquidation and re-organization. Liquidation: Liquidation is a process whereby the company is dissolved and in order to pay off its existing liabilities the assets are set to be sold for their salvage values. The going concern concept ceases to exist and the operations of the company comes to an end. The debtors are no more participants in the business and the creditors have authority to sell off the company’s assets to settle its obligations. The situation of liquidation is an ultimate situation as to when the company is completely unable to smoothly function in terms of its operations, revenue generation, and fulfilling of obligations and settlement is devised to completely cease everything. Re-organization: Re-organization plan of the business is being devised by the relevant authorities of the business in co-ordination with the creditors of the business. It tends to provide a phase to the business that it may re-organize its activities in certain manner that the deviations in the earlier business model may be fixed. The unnecessary business activities may be completely ceased so as to indulge into the core business activities with all of its available resources.

Question

Want to see the full answer?

Answer 1

Question

Chapter 30, Problem 5CQ

Summary Introduction

To explain: Difference between liquidation and re-organization.

Liquidation:

Liquidation is a process whereby the company is dissolved and in order to pay off its existing liabilities the assets are set to be sold for their salvage values. The going concern concept ceases to exist and the operations of the company comes to an end. The debtors are no more participants in the business and the creditors have authority to sell off the company’s assets to settle its obligations.

The situation of liquidation is an ultimate situation as to when the company is completely unable to smoothly function in terms of its operations, revenue generation, and fulfilling of obligations and settlement is devised to completely cease everything.

Re-organization:

Re-organization plan of the business is being devised by the relevant authorities of the business in co-ordination with the creditors of the business. It tends to provide a phase to the business that it may re-organize its activities in certain manner that the deviations in the earlier business model may be fixed.

The unnecessary business activities may be completely ceased so as to indulge into the core business activities with all of its available resources.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

You invest $1,000 a year for 10 years at 6 percent and then invest $2,000 a year for an additional 10 years at 6 percent. How much will you have accumulated at the end of the 20 years? Answer: $49,967 *Please include all work & formulas

No ai please! What is the role of an underwriter in an IPO?A) To lend money to the companyB) To set the dividend policyC) To buy the securities and sell them to the publicD) To manage the company’s operations need he

No ai tool What is the role of an underwriter in an IPO?A) To lend money to the companyB) To set the dividend policyC) To buy the securities and sell them to the publicD) To manage the company’s operations