For years banks assessed the credit standing of their borrowers on the basis of ‘liquidation analysis’, also often referred to as ‘gone-concern analysis’; some still do. Liquidation analysis, in its simplest form, values a company on what it would be worth in liquidation, i.e. at forced-sale prices. Unless this valuation shows that the company could pay its debts even in liquidation, the bank will not lend; or at least that is the theory.
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