Ethical Practices and Governance - PDF
Added on 2021-05-31
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Executive SummaryAccurate financial information enables informed financial decisions that sustain a business financial health. Companies strive to maintain their financial health by maximizing shareholders’wealth while able to settle their liabilities as they fall due (Foreman, 2014). Failure to settle liabilities lead to an entity being liquidation (Anderson, 2016). The following report analyzes three companies that have faced liquation in the past to explain how ethical practices and governance have contributed to their liquidation. These companies are ABC Learning, HIH Insurance, and One.Tel Company. The report aim is to establish if inability to settle liabilities was the major cause of these companies liquidation. The report reviewed journals and companiescase studies on the cause of their liquidation. The report found that unethical practices and poor governance led to financial stress that resulted to inability to settle liabilities leading to the companies’ liquidation.
Table of ContentsIntroduction.................................................................................................................................................1Discussion....................................................................................................................................................2ABC Learning...........................................................................................................................................2Liquidation of ABC Learning.................................................................................................................3HIH Insurance..........................................................................................................................................4Liquidation of HIH Insurance...............................................................................................................4One.Tel phone Company.........................................................................................................................5Liquidation of One.Tel Company.........................................................................................................6Conclusion...................................................................................................................................................6References...................................................................................................................................................7
Liquidation of CompaniesIntroductionCompanies operate as artificial person and are ongoing concern. A company life is deemed to be forever unless it liquidated. Liquidation is the process of bringing a company to closure voluntarily. Liquidation is as a result of a company inability to settle it liabilities as they fall due (Tricker, and Tricker, 2015). The company result to selling the assets with an objective of settling company’s debts. Companies exist to meet shareholders objectives of maximizing their wealth. Companies get funding from shareholders equity and borrowing to fund investments and operations. Maximization of shareholder’s wealth therefore involves investments and financial decisions that ensure the company achieves its objective. Failure to make appropriate investment and financial decision lead to a situation where the company cannot recover it invested funds andcannot settle debts when they fall due (Ahmed, and Ndayisaba, 2016). The company board then resolves to liquidate the company’s asset and settle the liabilities that the company owes its creditors. A company management is responsible to company liquidation. According to Brennan, (2016)lack of ethics and poor corporate governance lead to non compliance of conceptual frameworks of financial reporting that lead to poorly informed financial decisions. Ethics and governance influence quality and faithfulness of financial reports that are used for financial decisions making. The following report analysis three companies ABC Learning, One.Tel phone Companyand HOIH Insurance cause of liquidation and discussion on how ethics and governance lead to financial stress of the companies. The report also establishes if liabilities were the major contributing factors to the companies’ liquidation.DiscussionThe following section analyses ABC Learning, One.Telphoine Company and HOIH Insurance companies cause of liquidation. The discussion will use ethics and corporate governance to explain the companies’ financial stress and conclude if liabilities were the major cause of liquidation.
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