Definition of liquidating

Any transaction that offsets or closes out a long or short position. Liquidation also refers to a situation in which a company ceases operations and sells as many assets as it can; the company uses the cash to repay debt and, if possible, shareholders.

Liquidation often has a negative connotation for this reason. Case Study If eliminating dividends, laying off employees, selling subsidiaries, restructuring debt, and, finally, reorganization under Chapter 11 bankruptcy fail to resuscitate a business, the likely outcome is liquidation.

The term sometimes refers to net proceeds (after any commissions, fees or other charges are deducted), and sometimes refers to gross proceeds (before such deductions).

Earnings not paid out as dividends but instead reinvested in the core business or used to pay off debt.

It was expected the asset liquidation would result in creditors being paid only a portion of their claims while stockholders of the company would receive nothing.

The firm's stock was trading over the counter for 2¢ per share at the time of the announcement.

Collins English Dictionary - Complete & Unabridged 2012 Digital Edition © William Collins Sons & Co.

The person appointed as liquidator, either by the company directors/shareholders or by the creditors, sells off the company's ASSETS for as much as they will realize.If there is a surplus after payment of all creditors, this is distributed pro rata amongst the shareholders of the company. Liquidate means to convert assets into cash or cash equivalents by selling them on the open market.On the balance sheet, retained earnings appear under shareholders' equity.also called earned surplus or accumulated earnings or unappropriated profit.