Liquidation Preference
Liquidation Preference is a provision that determines the payout order in case of a sale, dissolution, or liquidation of the company.
Benefits
Liquidation preference gives investors confidence. They know they have a better chance of getting their money back if the company doesn`t succeed.
Frequently Asked Questions
What does liquidation preference mean?
Liquidation preference means some investors get paid first when a company is sold or closes. It ensures these investors recover their investment before others.
How do you use LTV in business?
Businesses use LTV to decide how much money to spend on getting new customers and keeping current ones happy.
Why is liquidation preference important?
It`s important because it protects investors, especially in risky ventures. It guarantees they get their money back first if things don`t go well.
Key Takeaway
Liquidation preference is a safety net for investors. It makes investing in new or risky businesses less scary, by promising a payback order in case things go south.