In view of the current economic climate, business owners keen to consolidate and reduce overheads may look to liquidate.
In formal terms, liquidation means “to bring a company to an end and distribute its assets to its claimants,” i.e. to close it down. With the current market conditions, many people expect to see a jump in liquidations as companies go out of business, especially among the SME sector. Revenues have decreased following restrictions on travel and subsequently trade, buffeting the first half of 2020 and striking a blow to profitability and cash flow.
When a company liquidates, the usual assumption is they have run out of money. From an accounting perspective, they have become insolvent when the value of their liabilities is greater than that of their assets. However, liquidations occur for other reasons that aren’t always reflected in statistics.