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I need a detailed answer to this question, thanks True/ False - The liquidation value of...

I need a detailed answer to this question, thanks

True/ False - The liquidation value of a company's shares always places a floor under its stock price

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Answer #1

The statement is false.

Reason: A company's share price during liquidation majorly depends on the management and worth of the assets as on the liquidation date. The management is certainly under no obligation to liquidate and may continue operations if it believes that the firm has worth than what has been perceived. Also, the management predicts that the future prospects are optimistic then it may decide to continue the operations with out having regard to those who may believe otherwise.

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