Asked by Lesley Figueroa on Jun 29, 2024
Verified
Which of the following is the best definition of liquidation?
A) The tax saving attained by a firm from interest expense.
B) Termination of the firm as a going concern.
C) The value of the firm is independent of its capital structure.
D) A firm's cost of equity capital is a positive linear function of its capital structure.
E) Financial restructuring of a failing firm to attempt to continue operations as a going concern.
Liquidation
The process of converting assets into cash or cash equivalents by selling them in the market.
Going Concern
An accounting assumption that a company will continue to operate for the foreseeable future, thus justifying the presence of its assets and liabilities.
Financial Restructuring
The process of reorganizing a company's financial structure, often involving re-negotiation of debts and equity, to improve its liquidity and ensure its survival.
- Pinpoint and describe the essential parts and effects of financial restructuring, liquidation, and reorganization for firms facing difficulties.
Verified Answer
LA
Lusine AvagyanJul 01, 2024
Final Answer :
B
Explanation :
Liquidation refers to the process of closing down a company and distributing its assets to claimants. It marks the end of the firm as an ongoing entity.
Learning Objectives
- Pinpoint and describe the essential parts and effects of financial restructuring, liquidation, and reorganization for firms facing difficulties.