Liquidation

Definition

  • In business, the process where some or all of a company's assets are sold or redistributed to pay off debts or compensate shareholders when the company goes out of business or wishes to sell a part of their business. Liquidation can be either compulsory, where a creditor forces a company to liquidate its assets to repay debts (also known as a "creditor's liquidation"), or voluntary, where shareholders agree to liquidate the assets in order to raise capital or to cause the dissolution of the business (also known as a "shareholders' liquidation").
  • Sale of a debtor's property, assets, and liabilities with the proceeds to be used for the benefit of creditors.
  • To convert (assets) into cash.

Synonyms
cash out, sell off, convert to cash, disbursement, settlement

Related Terms and Acronyms

  • Bankruptcy (BK) Acronym, Important,
    • A court action under the Federal Bankruptcy Code by which a debtor's debts may be discharged, usually by transferring assets to a trustee, or rescheduled.
  • Capital Gain (CG) Acronym, Important,
    • The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • Cash Collateral Definition,
    • The proceeds of cash collected from the sale of liquid assets while in bankruptcy.
  • Current Ratio Definition,
    • A method of determining an entity's liquidity and its ability to cover its current liabilities.
  • Division of Property Definition,
    • The dividing of marital assets during a divorce.
  • Illiquid Asset Definition,
    • An asset that cannot be sold easily or in a timely manner for its full value.
  • Liquid Assets Definition,
    • Cash and other property that can be converted quickly and easily into cash.
  • Liquidity Definition,
    • The ability to convert assets to cash quickly, without significant losses.
  • Non-dischargeable Debt Definition,
    • Debt that cannot be eliminated in bankruptcy such as Federal taxes.
  • Non-liquid Asset Definition,
    • A possession that can't be transformed readily into cash. Stocks and bonds are liquid assets because they can be sold easily; a house is a non-liquid asset because it takes time to sell.
  • Probate Sale Definition,
    • Sale of property after the death of the owner, supervised by a court, with proceeds divided among creditors and heirs.
  • Protected Cell Company (SPC) Acronym,
    • A company that separates its assets and liabilities into a number of 'cells' to shield itself and each 'cell' from losses.
  • Receivership Definition,
    • A form of bankruptcy where a person is appointed to take control of a company and is responsible for recouping unpaid debts.
  • Settlement Statement Definition,
    • A document that details who has paid how much to whom.
  • Solvency Definition,
    • To be able to meet one's financial liabilities in the short or long term.
  • Tax Sale Definition,
    • A government sale of property to recover unpaid taxes.
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