Liquidation Company Assignment

LIQUIDATION OF A COMPANY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Main Body.......................................................................................................................................1
ABC learning...............................................................................................................................1
HH insurance...............................................................................................................................3
One Tel case................................................................................................................................4
CONCLUSION................................................................................................................................5
RECOMMENDATIONS.................................................................................................................5
REFERENCES................................................................................................................................6
.........................................................................................................................................................6

INTRODUCTION
Liquidation is an event that take place when the company become bankrupt. It do not
have enough money with it in order to pay its obligations. There are various reason that clan
bring the company in the state of liquidation. It includes, increase in creditors, decrease in
revenues, decrease in brand value etc. The report discusses the case of liquidation with respect to
the three major companies of Australia, it includes, ABC Learning, HIH Insurance and One Tel
phone company. Several reasons for their liquidation will be pondered on the report such as,
financial stress, adoption of unethical practices, legal actions by other entities, false
representation of facts etc. In the end, the report discuses various recommendation that are
provided to the existing company regarding adoption of ethical behaviour and opt for the
accounting concept of going concern diligently.
Main Body
There are various reasons that can led a company to liquidation. It includes, a high degree
of financial stress, lack of planning, failure in strategic directions, inflexibility in business model
etc. The entities have to opt for better strategic techniques so that they can continue with its
functionality without its closure (Assaf, 2013).
ABC learning
ABC learning was an Australian company involved in providing childhood education
services. It came into existence in 1988 and went into liquidation in 2010.
The company was performing good till 2006 where its market capitalisation went to A$2.5
billion. The company then went into receivership after its fallout in sub-prime mortgage crisis.
The company went into debt and didn't able to generate revenues for repayment. An expected
drop in the profits by 42% was experienced in the second quarter of 2007 leaving the gains to
$37.1 million.
ABC was involved in various unethical practices as well. It used to provide low wages to
the workers in order to practice cost cutting which made the employee turnover ratio high in the
company. In order to generate higher profits the company also went on cost cutting by degrading
education and child care facilities provided by it. It made the business model unsustainable.
The questionable accounting practices of the company where company tend to show in its
financial reports that it is earning about 30% to 40% profits of the revenues. It kept window
dressing its accounts and showing profits even if the company was running in losses since years.
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