As a business strategy, it is important to know when and how to convert assets into cash. While liquidating assets is an essential part of bankruptcy procedures, companies also use liquidation as a means to free up cash, even in the absence of financial hardship. Generally the primary reasons to liquidate are to get rid of surplus or idle assets, to obtain additional working capital, or to pay off creditors.
Before you begin the process, consult with your attorney and accountant or a professional tax advisor to help you through the process. Moreover, if you intend to liquidate assets to satisfy creditors, you may need to obtain their consent to do so.
There is a process to convert assets into cash in order to get optimal results. First you need to do a thorough inventory and evaluation of all the assets, whether real estate, machinery or equipment, you wish to liquidate. Compile detailed information regarding the original purchase price, age, and condition of the asset, along with quality photos. Do not forget to include records on warranties as well as repair and maintenance history.
Next, consider how you want to market your assets to best achieve the liquidity you need. Liquidation sales andauction sales are two of the most commonly used ways to recover assets. A liquidation sale is a process of selling assets in an orderly manner over a period of time, with the goal of realizing higher values that are closer to fair market price.
Auctions have the advantage of taking place very quickly from start to finish but may not draw as high of prices as a liquidation sale. This is where marketing can improve the outcome because competition among bidders is what determines the item’s selling price, and more competition can drive a price up.
Strategies to Convert Assets into Cash to Realize Maximum Value Include:
Carefully evaluate your asset disposition plan by factoring in possible outcomes, along with all of the costs involved. Look at the potential costs of not doing it (both legal and otherwise).
Consider listing your equipment with a liquidity specialist that has the resources and expertise to address your asset disposition needs. This not only minimizes the organizational disruption, it also takes advantage of the expertise of a third party who has the experience to help maximize returns.
Find buyers by reaching out to your industry contacts, including any equipment dealers, competitors, and suppliers
For equipment that is old, worn out or damaged, consider selling it for scrap value, or donating it to charity (if possible) for a tax deduction.
Rabin is a national asset disposition firm, specializing in industrial and commercial facilities with idle or marginally productive assets. Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation. If you would like to learn more about Rabin’s auction liquidation services, please contact usfor a free confidential consultation.
First you need to do a thorough inventory and evaluation of all the assets, whether real estate, machinery or equipment, you wish to liquidate. Compile detailed information regarding the original purchase price, age, and condition of the asset, along with quality photos.
The term “liquidate” means converting property or assets into cash or cash equivalents by selling them on the open market. Liquidation similarly refers to the process of bringing a business to an end and distributing its assets to claimants. Liquidation of assets may be either voluntary or forced.
Financial liquidity refers to how easily assets can be converted to ready cash without affecting its market price. Assets like stocks and bonds are very liquid and can be converted into cash within days.
Liquid assets, however, are the assets that can be easily, securely, and quickly exchanged for legal tender. Your inventory, accounts receivable, and stocks are examples of liquid assets — things you can quickly convert to hard cash.
The cash asset ratio is calculated by dividing the sum of cash and cash equivalents by current liabilities. Cash equivalents include items such as treasury bills, bank certificates of deposit, commercial paper, and other money market instruments.
Noncurrent assets are a company's long-term investments, and cannot be converted to cash easily within a year. They are required for the long-term needs of a business and include things like land and heavy equipment.
A conversion is the exchange of a convertible type of asset into another type of asset—usually at a predetermined price—on or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security.
Liquid assets like cash, stocks, and most bonds can be quickly converted to cash with minimal impact to their value, while non-liquid assets like real estate, collectibles, and equipment cannot be readily converted to cash without a significant loss in value.
Note: Liquidation Liquidation - is the process of converting partnership assets into cash and distributing the cash to creditors and partners. Frequently, the sale of assets will not provide sufficient cash to pay both creditors and partners. The creditors have priority on any distribution.
Introduction: My name is Arielle Torp, I am a comfortable, kind, zealous, lovely, jolly, colorful, adventurous person who loves writing and wants to share my knowledge and understanding with you.
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