Business Glossary

process of closing a business entity, including selling or disposing of the assets, paying the liabilities, and having whatever is left over returned to the owners.

1. dismantling of a business, paying off debts in order of priority, and distributing the remaining assets in cash to the owners. Involuntary liquidation is covered under Chapter 7 of the federal bankruptcy law. See also junior security ; preferred stock .
2. forced sale of a brokerage client's securities or commodities after failure to meet a margin call . See also sell out .

1. conversion of assets into cash or inventory into accounts receivable to meet current obligations and service long-term debt of an organization. When an obligation is paid off it is said to be liquidated.
2. termination of a business by selling its assets and distributing the proceeds to meet current liabilities and claims of creditors. Debts are paid in order of priority and remaining assets distributed on a pro rata basis to owner or shareholders. In a voluntary bankruptcy petition, filed under Chapter 7 of the Bankruptcy Code, the debtor's assets are distributed to meet creditors' claims, in order of priority. A group of creditors can also file an involuntary bankruptcy petition, to force the sale and distribution of the debtor's assets.
3. closing out a long position or a short position .

procedure in which shareholders surrender all of their shares in a corporation and receive, after all creditors are paid, their pro rata share of any remaining assets and accumulated earnings and profits. Liquidation is deemed to occur when a corporation ceases to be a going concern and its activities are merely for the purpose of winding up its affairs, paying its debts, and distributing any remaining balance to its shareholders.