Following our first three articles on business devaluation during insolvency, we now turn our attention to the liabilities in the balance sheet. What is often not realised is how a business’s liabilities can grow faster than Jack’s Beanstalk once the business has transitioned from a going concern to a financial downturn ending in insolvency proceedings. This can occur on a
In this third instalment on the devaluation of a business during insolvency, we turn our attention to current assets. These assets can not only shrink alarmingly in value during insolvency proceedings, but can also, in some circumstances, actually turn into net liabilities. How can current assets lose value? Inventories Inventories include a wide range of different items. From raw material
In our first article in this series, we looked at the mystery of why apparently solvent companies end up heavily devalued and paying almost nothing to their unsecured creditors if they have the misfortune to file for insolvency. Now we dive into more detail into the conflict between book values and real life realisations in an insolvency context, starting with a
Those who run and manage businesses are familiar with the two traditional sources of funding. They understand balance sheet finance, whether it is debt from lenders or equity from shareholders. They also live with the vagaries of the liquidity (positive or more usually negative) that is generated from trading and operations, in the form of the difference between what they
The Coronavirus Business Interruption Loan Scheme (CBILS Scheme) One of the three main pandemic loan mechanisms, the CBIL Scheme, ran from March 2020 to March 2021. Lenders advanced a total of £26.4bn to 109,877 borrowers at an average loan value of £240,000. The maximum loan was £5m and the government provided a guarantee of 80% of the debt. The lender
The government’s cut in support for businesses on their energy costs announced in the new Energy Bills Discount Scheme was expected, but the scale of it has left some high energy use sectors gasping. Overall, the new arrangements mean an 85% cut in the discounts for the business community from £18bn in six months under the old scheme to only
