Liquidation

Liquidation is a business process where assets are converted into cash and used to pay off liabilities. It typically occurs when a company is no longer able to continue operations.

For example, if a company is unable to pay its debts, it may be forced to liquidate its assets to satisfy creditors and shareholders. Assets such as inventory, real estate, equipment and accounts receivable can all be sold in order to generate cash to repay liabilities.

This process can be represented by the following formula: Assets - Liabilities = Liquidation Value. In this equation, liquidation value refers to the amount of cash that would be available after all liabilities have been paid off.