Would it be a sound rule to liquidate whenever the liquidation value is above the value of the corporation as a going concern? Discuss.

Category:

Would it be a sound rule to liquidate whenever the liquidation value is above the value of the corporation as a going concern? Discuss.

0
0

Would it be a sound rule to liquidate whenever the liquidation value is above the value of the corporation as a going concern? Discuss.

Explanation & AnswerSolution by a verified expert

Explanation

A company's value as a going concern is calculated based on its outlook. This value can be improved by changing management or operations. This negative outlook might also be caused due to temporary financial distress. If the company's value as a going concern cannot be improved and the creditors face a high risk if the operations are continued, then the liquidation is necessary. The firm must pay its creditors by distributing its assets when the firm's liquidation value is more than the value as a going concern.

Verified Answer

Liquidation is not necessary if the firm's value of its assets is more than the value of the company as a going concern. A company's value as a going concern can be improved by changing the management or the operations. If this does not provide sufficient results, the company may decide to liquidate.

Purchase this answer to view it. $5
Login/Sign up for free, load your wallet instantly using PayPal or cards and purchase this solution to view it.


Get Help With Your Assignments

Place your order now and get a quality plagiarism-free paper via email.

Write My Paper For Me