A Guide to Company Shut-Down - Research Paper Example

The table below shows the analysis of our company’s profit at the present.

TOTAL COST.

No. of workers= 50,000
Daily wage per worker= $80
Total wage= 50,000 x $80= $400, 00, 00
cost of variable inputs=$400,000.
So the total cost = 400,00,00+400,000= 440,00,00\

TOTAL REVENUE.

Units of out put per day=200,000
price per output= $25
total revenue= 200,000 x $25= $ 50,00,000

Total Profit= (50,00,000 - 440,00,00)= $600,000

There are two basic tests to find out if one’s company is insolvent:

• Are our liabilities greater than your assets?
• Can we pay your debts as and when they fall due (Thatcher, 2009)?

So the two tests hold true for our company for the assets that it has in the form of profit is negligible to the extent of being lesser than the liabilities. And since the profit is less, we will not be able to pay all our dues in the present or in the future.

The situation of our company seems to be in a dire situation and it is “best if (the company) shuts down (it’s) operation in time, it may be able to avoid bankruptcy” (Business Shut Down).

I request you to assess my report and take the appropriate action.