Liquidation of HIH Insurance | Report

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Added on  2020-02-19

Liquidation of HIH Insurance | Report

   Added on 2020-02-19

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The report is about analysis of the major events which led to these firms being liquidated. Based on the analysis of the three scenarios, it can be stated that the collapse of the three firms were mainly attributed by numerous aspect or events ranging from poor or failure in corporate governance, aggressive expansion to unethical practices of the directors and auditors. One overall, it can be noted that the collapse of HIH, One-Tel as well as ABC Learning were attributed by unsustainable business strategies, poor auditing practices, potentially excessive management compensations, weak corporate governance, ineffective working capital management as well as questionable related transactions. In spite of these aspects, their failure can also be related to their enthusiasm of pursuing low yielding practicesand not saving adequate amount of cash in covering their liabilities. In essence, it can also be reported that the major event that resulted in liquidation of HIH Insurance, One-Tel as well asABC Learning is aggressive expansion or excessive liabilities. This is mainly based on the fact that aggressive expansion resulted in increased debt to equity margin or increased liabilities which in turn made the firms risky since their leverage was far much beyond their capability of repaying the loan. This means that proper corporate governance is crucial in anyorganization in facilitating good financial management and practices to avoid any event where liabilities become more than the amount of return being generated.
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