Going Concern to Liquidation

My friends who belong to finance field are very familiar with my subject terminologies, going concern is an accounting assumption that assures organization will be operating in foreseeable future, and will fulfill its all  obligations  timely. Liquidation value is dead end of organization and is calculated when firm can not generate profit in future, and will not be able to fulfill its obligation in near future. In general going concern and liquidation values are two extreme opposite ends of a scale , where between an organization lives, and this is the central idea of this blog that how organization is balanced in this seesaw game.

An investor that has his stake in an organization will always want to keep his organization away from liquidation end and like to be in safe zone of going concern, so that his future return should be assured and guaranteed. surface where organization resides, infact has slope towards liquidation side, and if the organization is not managed it will start falling automatically towards  liquidation, and will loose his value.

Organization is the multitude of business and Financial risk, particularly interest rate risk, currency exchange risk, credit risk and price risk, and these risk drive organization toward liquidation side of scale, if it is not managed properly. Management who is responsible to take organization in direction of success, always try to medicate these risk by using derivatives and hedging technique so that organization remain in safe zone.

After current and past accounting scandals, particularly Enron, user of companies financial has started demanding transparency and maximum disclosure, so that they could be alarmed about company risk before it comes in liquidation zone .

Capital Budgeting process wherein management strive to evaluate the project that will increase share holder worth , and decisions of capital budgeting is based on cash flow in term of return, which is an essential financial indicator to recognize that the entity is going concern.

And then we further study in corporate finance about the leverage that depicts the slope of organization's surface where organization reside. Higher the slope higher the return but higher the tendency to fall towards liquidation side.

Beside the external factor that effects organization there are some internal issues as well that leave organization in danger zone , to deal with internal  issues management use different tools like corporate governance and company policies. Company policy defines standard procedure to deal with unforeseen circumstances, and agency issues and other potential conflict of interest between stakeholders and management are dealt with Corporate Governance, company that does not have sound system of corporate governance in place is taking on major risk, means greater probability of organization to slip towards danger zone of liquidation side.


In Finance, risk management to return enhancement and company policies to corporate governance, are the art of Finance that how to keep the organization in safe zone(going concern) and this is the main idea to write this blog to describe as civil engineer ties a bridge in air,Financial engineers keeps trying to push the organization in safe side of this inclined surface where the upside is success and the down side is dead end (liquidation) of organization.

This is all about Financial Management.

Social Norms

At the time of writing this blog I am also little confused that why did I choose this blog "Social Norms" while I am writing my 1st blog.

Pakistan is a country that has got attention from the whole world, unfortunately not due to its outshining economy or remarkable progress, but due to its devastation that has come not only from one end but surrounded  Pakistan at the moment, here i mean of devastation not only bomb blast and terrorism but corruption, lack of patriotism, Political instability and last but  not least social issues, and you can easily find more issues and their analysis on current Pakistan's condition in Pakistani media and in western media.

If you will ask issues and causes of these ngoing issues in Pakistan from any political science student they might tell you the interruption in democracy process by Pakistan Army and the democracy process can resolve entire issues, if you will ask any businessmen they will tell you the careless economic approach and we should go towards production , if you will ask any farmer he will tell you the water shortage and dams are the solutions, and you will be puzzled with various issues and their solutions.

Being a student fo Management studies, when I ask this question from my self I dont find myself comfirtable with above given issues and reasons , because these specific reasons can not accumulate these list of issues and my mind start finding a universal problem that can be the cause of these symptoms and at the end of my thought I found social norms, that used to be a part of our culture before, but no more a part of our culture now.

You might be thinking that how come the social norms can be the root of these major problems. Social norms are basically nation's values, belief, attitude and behavior that build people character and then ultimately society.

We lack our social norms in our all action like our protest style, attitude towards traffic rules, accepting other's point of view, voluntary tax compliance ,resolution of conflict display etc, I mean you can see an student to professional in our society are living with out any ethical and moral values.

In reply of of any action around the world, we start protesting in our country  in a way that we destroy our properties, even we did not learn how to  record our point of view in front of the world. When we talk about traffic rules we don 't know even basic driving rules and keep driving slow in fast lane and when other horn us we start arguing instead of accepting our mistake, I was impress to see in Malaysia that a taxi driver feels his obligation to thanks other by waving his hand when other gives him way, but our society don't sense it important.

By developing those values in our society that increase comfort for others we can  decrease aggression and anger from our society,  and can register our name in develop nation list, and with out these values we can increase our GDP growth to double figure ,we can have a strong democracy like India but will not have unity and uniformity in our lines and the condition will be the same as today, lawyer will be fighting with judges , patinet will be protesting against Doctors and student will be complaing about professors behaviour, like today we have made our nation atomic power but could not teach them how to wait in the queue for their turn?

In summary, the main idea to write this blog is to reinforce the importance of social norms that we have lost in past somewhere, and as we emphasize our other issues, we should not consider our ethical and moral values unimportant.