Are liquidations likely to be more common for public utility, railroad, or industrial corporations? Why or why not?

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Are liquidations likely to be more common for public utility, railroad, or industrial corporations? Why or why not?

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Are liquidations likely to be more common for public utility, railroad, or industrial corporations? Why or why not?

Explanation & AnswerSolution by a verified expert

Explanation

Public utility and railroads involve essential services. Liquidation of these companies may lead to a huge loss; hence the financial distress is resolved by reorganization or merger rather than liquidation. However, industrial corporations do not include essential services; hence, they are more likely to liquidate if the firm's liquidation value is more than its value as a going concern.

Verified Answer

Industrial corporations are more likely to liquidate, as it does not involve any essential services. However, public utility and railroad are less likely to liquidate as they involve essential services. In these corporations, financial distress is solved through reorganization or mergers.

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