If a firm has a stock based insolvency in both book and market value terms and liquidates:

Question

Quizplus · Accepted Answer

A stock based insolvency implies that the firm's liabilities exceed the value of its assets, and if it liquidates, the proceeds from the sale of assets may not be sufficient to pay off all investors in full. This means that some investors are likely to receive less than the face value of their investments. In such a case, unsecured creditors are likely to get less than full value as they are lower in priority than secured creditors. Moreover, equityholders are the last to be paid and typically should receive nothing in a liquidation scenario.

If a Firm Has a Stock Based Insolvency in Both