A business has a number of components, the most important of which is financial resources. To begin a business, one needs an investment; to continue a business, one needs finance and to increase the business one needs financial resources as well. Most companies when begin; plan to obtain big profits and dream of fame. But more companies than not often fail to survive owing to the ceasing of cash flow as opposed to the idea of business being wrong. So we see that finance is the most important part of any business.
•The overall business scenario.
All things owned by a business has some value attached to it. These things are termed as assets. Assets don’t only refer to the cash invested but also equipment, land, buildings, or even ideas owned – anything that can be sold. In fact, the goodwill of the company is also counted as an asset. The next term is liabilities which refer to the things a company owes to other people. Liabilities could be loan obtained from a bank, compensation for the raw-materials obtained or even the tax owed to the government.
•Income vs Expenditure.
The income of the company is in the form of revenue coming from sales. The expenditures are regular in pattern which consists of insurance, salaries to be paid to the employees, rent for the land or building taken, as well as advertising. If for some reason, income is not coming in at the same rate that expenditures are, the business can begin to experience problems.
•No finance means doom.
What happens when this financial component is no longer available? The person (or persons) owning the business has to begin by declaring bankruptcy followed by filing a petition with the bankruptcy court. The business reaches a business liquidation phase which implies that the company (or part of the company) is brought to an end and assets and property of the company redistributed.
•Steps leading to insolvency.
There are various stages that a business goes through when it becomes insolvent. The first step is to determine if the company can be revived from this lack of resources from cash flow coming from third parties or selling some of the assets owned by the company.
But if the loss incurred by the company is greater than all its assets put together and the company does not seem to have any way out, it needs to go into business liquidation. Liquidation refers to the ease with which an asset can be turned into cash. This is important to help a business have the ability to pay off its debts.
•Insolvency practitioners may be the answer to your difficulties.
To help a company experiencing financial difficulties or which is on the verge of bankruptcy and to enable it to rejuvenate, insolvency practitioners are a ray of hope. An Insolvency practitioner is a legally authorized person specialized in the field of a business being in financial difficulty, bankrupt or in offering insolvency service.
Insolvency solicitors also offer insolvency services by offering advice in such situations. A company on the verge of business liquidation may employ a firm specialized in insolvency services. Such firms take the responsibility of dealing with the company’s creditors and negotiating good deals. These firms utilize their association with banks to negotiate debt write-offs.
This content refers to the reasons leading to insolvency service of a company and the subsequent business liquidation. Insolvency practitioners and solicitors offer insolvency practitioners and help a company out of financial duress.