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AV Financial Accounting InTRODUCTION EVENTS THAT LED TO LIQUIDATION

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Added on  2019-10-30

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Advance financial accounting INTRODUCTION 1 EVENTS THAT LED TO LIQUIDATION 1 THE REASON BEHIND COMPANY’S FINANCIAL STRESS 3 MAJOR FACTOR – LIABILITY 4 CONCLUSION 4 REFERENCES 5 INTRODUCTION Liquidity is regarded as the stage where it becomes difficult for the organization to conduct its business operations and in turn company has to sell its assets when the company becomes solvent. EVENTS THAT LED TO LIQUIDATION A large number of valid reasons are present due to which companies operating in

AV Financial Accounting InTRODUCTION EVENTS THAT LED TO LIQUIDATION

   Added on 2019-10-30

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Advance financial accounting
AV Financial Accounting InTRODUCTION EVENTS THAT LED TO LIQUIDATION_1
Table of ContentsINTRODUCTION...........................................................................................................................1EVENTS THAT LED TO LIQUIDATION....................................................................................1THE REASON BEHIND COMPANY’S FINANCIAL STRESS..................................................3MAJOR FACTOR – LIABILITY...................................................................................................4CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................5
AV Financial Accounting InTRODUCTION EVENTS THAT LED TO LIQUIDATION_2
INTRODUCTIONLiquidity is regarded as the stage where it becomes difficult for the organization toconduct its business operations and in turn company has to sell its assets when the companybecomes solvent. The ultimate reason behind liquidation can be considered as high debt burdenwhere the company has taken the higher amount of loan and is not able to repay the amountback. The present study is based on three organizations named HIH insurance, OneTel companyand ABC learning that have gone into the process of liquidation due to the presence of differentreasons. Apart from this corporate governance and ethical activities of the companies have beenanalyzed in the present study. EVENTS THAT LED TO LIQUIDATIONA large number of valid reasons are present due to which companies operating in themarket reaches the liquidation stage and in turn, it becomes difficult to conduct overalloperations. The liquidation of HIH insurance was the biggest example of liquidation in theAustralian market where the overall analysis has shown that some issues in the internal system ofthe enterprise were present such as ineffective monitoring, poor planning, ineffective utilizationof financial resources, etc[ CITATION Jia08 \l 1033 ]. HIH group operates on the wider basisand is comprised of HIH Casualty, FAI general insurance company, General insurance limited,etc. Further, the directors of the organization breached their duty, and due to this reason, theywere not involved in the key affairs of the enterprise. Overall the corporate culture of the business was conservative in nature along with thepoor governance practices that directly led to the downfall of the organization in the market.Considering the acquisition strategy of HIH company which was also aggressive and this actedas the main issue while maximizing profits. In March 2001, the estimated value of the firm wasbetween $3.6 billion and $5.3 billion as analyzed by liquidators. Further, the liquidation of thebusiness badly affected the construction sector where different builders undertaken by thecompany had to seek replacement coverage[ CITATION Col11 \l 1033 ]. The key reason behindliquidation was the inability of the organization to pay claims of insurance policy holders andanother form of debts that were due. The report published by the HIH royal commissionindicated that company witnessed loss of $73 million against a net earned the premium of $1550million on 30th June 1999. So, this reflects the key reasons behind the failure of the company inthe market. 1
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