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Homework answers / question archive / Briefly discuss the following topics: insolvency- liquidation and reorganization

Briefly discuss the following topics: insolvency- liquidation and reorganization

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Briefly discuss the following topics: insolvency- liquidation and reorganization.

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  • Insolvency. Various operations of a business entity attract both gains and expenses. Expenses are cost incurred which are meant to be settled at a given period. The state of financial distress, in which a business is unable to settle its expenses is referred to as insolvency. It arises from diverse scenarios that result in poor cash flow.
  • Liquidation. When a company is insolvent, a lot of bills accumulate. Different individuals, financial institutions and other bodies claim their dues from the business. The process of bringing a bankrupt business establishment to an end and distributing its assets to its claimants is referred to as liquidation.
  • Reorganization. This is the process that is adopted to revive and help a bankrupt or financially troubled business recover and be operational once again. It involves restructuring and making special arrangement which minimizes the reoccurrence of past events which led to bankruptcy. It's intended to extend the life of a business.

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