Bankruptcy Liquidation and Reorganization
In the business world, changes in circumstances are common and can sometimes lead to a company's failure if they are not properly managed. Factors that can contribute to a company's failure include poor management, excessive debt, and inadequate accounting, which can result in the inability to pay debts when they come due. This is known as bankruptcy. It is important to note that the terms insolvent and bankrupt are often used interchangeably, although they do not have the same meaning.
Insolvency refers to the financial state of a person or business in which their debts exceed the fair value of their assets.
Bankruptcy, on the other hand, is a legal status that is assigned to a person or business that has been declared insolvent.
In this chapter, we will delve into the concepts of: