Securities Trader Representative (Series 57) Practice Exam 2025 – All-in-One Guide to Exam Success!

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What does "liquidation" mean for a company?

Expansion of company operations

The sale of company assets to pay creditors

Liquidation refers to the process a company undergoes when it sells off its assets to pay creditors, often occurring when the company is facing bankruptcy or insolvency. In such situations, the company must convert its assets into cash in order to satisfy outstanding debts. This process may involve selling property, inventory, equipment, or other valuable items owned by the company.

When the assets are liquidated, the funds generated are typically distributed to creditors based on their priority in claims. Shareholders often receive no return in a liquidation scenario if the company cannot cover its debts. This process is crucial for understanding how companies manage their obligations and is an essential concept for those engaged in trading and financial analysis. By focusing on this understanding, traders can better assess the financial health and risk factors associated with a company's operations.

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Acquisition of another company

Raising additional capital through stock issuance

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