Financial Terms / K - L / Liquidation

Liquidation

In simple terms, liquidation is the process of conversion of assets into cash. When a company becomes insolvent or files for bankruptcy, its assets are sold off to pay its creditors and shareholders. Priority is usually given to the debtors first, and the rest is distributed among the company's shareholders.

Liquidation can occur when shareholders voluntarily vote to liquidate the company's assets or when a creditor files a petition to the court to request their money back.