The Demise of HIH Insurance : Report

Added on - 28 May 2020

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ABC, OneTel, and HIHExecutive summaryThe current situation of companies has raised many questions owing to the emergence ofseveral issues. Further, various companies have also faced liquidation and dissolutionprocesses as a result of increment in their liabilities and decline in assets. This is the reasonwhy ABC, OneTel, and HIH Insurance have been selected as these companies highlight thecontext wherein companies encountered liquidation because of major issues prevailing withinthem. Moreover, the major reason behind their liquidation can be attributed to their incrementin liabilities in comparison to assets that interrupted their smooth flow of operations.1
ABC, OneTel, and HIHContentsIntroduction...........................................................................................................................................2Assessment............................................................................................................................................3Complications in reporting procedures.................................................................................................4i.HIH downfall..................................................................................................................................5ii.Downfall of OneTel........................................................................................................................6iii.Downfall of ABC Learning..............................................................................................................7Conclusion.............................................................................................................................................9References...........................................................................................................................................102
ABC, OneTel, and HIHIntroductionIn Australia, many companies encountered issues that resulted into their liquidationprocesses. Few major companies in such scenario are ABC Learning, HIH Insurance, andOneTel Ltd. The reason behind liquidation of all these companies can be attributable to thefact that they faced crunch of financial resources after being overburdened by debtobligations. As a result, they failed to continue smooth flow of operations and besides, thesecompanies also lacked proper corporate governance practices that resulted in their downfall.Overall, the increment in liabilities of the company was the prime reason why thesecompanies failed to persist in the market and had to witness downfall (Manoharan, 2011).Hence, it is notable that heavy reliance on debt obligations must be strictly avoided bycompanies as it often results in creation of a heavy financial crunch that is difficult to beavoided. With the help of this report, prime importance will be exerted upon the liabilitiesthat resulted in liquidation of all three companies.3
ABC, OneTel, and HIHAssessmentOneTel Ltd is considered as the biggest telecommunication organization throughout Australiabut because of improper corporate governance practices and heavy reliance on debt, thecompany encountered liquidation processes. Such improper strategies and measuresimplemented by the company played a key role in its downfall. For example, the auditprocedures undertaken were inappropriate in nature, internal control mechanisms wereincomplete too, etc. Besides, when it comes to HIH Insurance Ltd, the company alsowitnessed a same scenario in the year 2001. Before such situation, HIH was also consideredthe biggest organization in its industry as it possessed a huge base of assets. However, in2001, the company exerted mass reliance upon debt capital structure to finance its smoothflow of operations that resulted in its downfall, as the company became overburdened withdebt obligations and such massive asset base also became insufficient to repay those.Moreover, it was also notable that inappropriate knowledge and interpretation of risksassociated to businesses also played a role in the company’s liquidation (English et. al, 2013).Therefore, it can be observed that both such companies faced issues of liquidation as a resultof high reliance on debt structure and improper corporate governance approaches. With thisreport, the exact complications will be accounted for a better understanding.4
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