What is liquidation?
Liquidation is the name of the process in which a company or business is brought to an end. The company’s assets and property are redistributed among the creditors and owners. Liquidation is sometimes referred to as winding-up or dissolution, and the name suggests the work done. The event usually occurs when the company is close to an end and cannot pay the obligations. You can calculate your liquidation price and value and save your company from liquidation. Click here to use the liquidation price calculator. Calculate position size, stop-loss, and more.
What is the purpose of liquidation?
The main purpose of liquidation is to ensure that all the company’s affairs have been dealt with properly and all the assets have been realized. After liquidation, the liquidator can request to remove the company’s name from the register, which means that the company doesn’t exist anymore.
What is the procedure of liquidation?
In the process of liquidation, we have an administrator who is also known as a liquidator. The administrator is appointed at the time of liquidation, and he takes over the company’s control. After taking control, the administrator collects the assets, pays the debts, and lastly distributes the left surplus among the company’s members by rights.
What happens when a company goes into liquidation?
During the liquidation, the company’s assets are sold to repay the creditors, and the business is closed down. The name of the company lives, but the status is changed to liquidation. By dissolution, the removal of the name can be done. But dissolution is done approximately after three months of the closure of the liquidation.
What are the types of liquidation processes?
There are two types of liquidation: solvent liquidation and insolvent liquidation. Insolvent liquidation, the director’s retirement is involved, or we can say that the business has no useful purpose and all the members are ready for its closure process. The solvent liquidation is also called the member’s voluntary liquidation.
The other type is insolvent liquidation, and it occurs when the company is unable to carry on because of financial reasons. Insolvent liquidation aims to divide the assets and profits to the creditors.
How is liquidation calculated?
The calculation of liquidation price is done based on the trader’s selected leverage, entry price, and maintenance margin. The liquidation value is the price of an asset sold in the open market for an insufficient time, thus reducing the asset exposure to potential buyers.
To calculate the liquidation value, we have to subtract the liabilities from the auction value. To get the full calculations of stop-loss, position size, take-profit, and more, you can use the liquidation price calculator. By calculating and knowing the liquidation price, many unnecessary liquidations can be avoided.
Does leverage bring changes in the liquidation price?
Yes, changes in the leverage bring up changes in the liquidation price. Higher leverage indicates that the prices must move to a smaller percentile distance before liquidation.
How to avoid liquidation?
If we can raise enough money to pay the debt in full or negotiate them with the creditor for some instalments, the company can be saved from being liquidated. In addition, the individual might be able to secure alternative ways to do finances.
How to avoid liquidation margin?
The most efficient way to avoid margin calls is by using some protective stop orders that will limit the losses from equity position. Additionally, it will keep adequate cash and securities in the account.
How long do the liquidation sales last?
The liquidation sales might last for between eight to ten weeks. During the initial weeks, minimal discounts on the items are offered, and as the number of items decreases, the discount increases. At the end of the sale, large discounts are enjoyed by the customers on the left out products.
Can one start a new company after liquidation?
Yes, you can start a new company after liquidation. But the name of the company should be different from the older one. This is because there are many legal restrictions for using the same company name. If you’re using the same name, you must inform all the creditors of the previous company that you’re starting a new company with the same or similar name.