When an entity chooses or is forced by a legal judgment or contract to turn assets into a "liquid" form (cash). An individual may choose to liquidate his or her possessions or investments to pay off creditors, convert assets to cash for spending or because the investments are not going to increase in value and the investor wants to re-allocate funds.2.
Businesses are best known to liquidate assets as a part of bankruptcy procedure, but the process can also be used by businesses to free up cash, even in the absence of financial hardship.
Once the process is complete, the business is dissolved.
The quick ratio equals current assets, minus inventory, divided by current liabilities.If you have decided to get out of business and are not able to pass your business on, merge it with another business, or sell it as a going concern, liquidating the assets could be the most appropriate exit strategy.However, before you terminate your lease, sell a key piece of equipment, or disconnect your utilities, make sure you have a well thought-out plan.If you determine that liquidating your assets is your best course of action, follow these key steps.A quick ratio below industry standard means that your company has a relatively lower liquidity position than its competitors on one of the three common liquidity ratios used by companies.