Reason for Company Bankruptcy/Liquidation
If an individual or a business has been declared bankrupt it means that the legal status of the business or that particular individual is not in a position to pay the debt that he/she own or the business is not in a position to pay off the debts that the business has.
In most instances companies or businesses that are declared bankrupt are basically initiated by the debtors and following the due process that is required for a company to be declared bankrupt a court order has to be handed out declaring that a particular company is bankrupt. Liquidation is a term that is majorly used in economic or a financial environment meaning the process in which a company stagnates and the that are under the company then gets shared by the claimants. Liquidation process does take place when the company is insolvent meaning that the company is not capable of paying of its obligations in due time.
For a company that has come to a halt and is declared bankrupt the operations that still remain of the company gets distributed to various entities and the most common entities are the creditors of the company and also the shareholders of the company where the operations are divided into depending on each entities claim.For a business to able to survive and also strive in the market it means that it has to make profit regardless of the size of the business whether big or small since if the company cannot be able to generate profit then it will be forced to leave the market and also be declared bankrupt. The market condition where a particular company has been established could contribute heavily as to why a company should be declared bankrupt making it one of the many reasons that could affect the condition of the financial situation of a company for it to be declared bankrupt.
Part of the market conditions that one is likely to experience is when the big companies tend to offer major competition to companies to the small companies available that may lead to closure of the small companies and also innovations that come up for example instead of purchasing a certain product there comes an option of downloading the same product. When financing a company the business may take up a loan to finance a specific project and when the outcome of the project is not good the business may suffer financial struggles that cold in turn lead to the business being closed and also be declared bankrupt.
It is important to familiarize with each and every financing details in a company so as to make the right choices when making important financial decisions in the company.