Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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What is the primary aim of administration in a company?

To Liquidate the company's assets
To rescue the company so that it may continue as a going concern
To increase shareholder value immediately
To pay off all outstanding debts

The correct answer is: To rescue the company so that it may continue as a going concern

The primary aim of administration in a company is to rescue the business so that it may continue as a going concern. This process is typically initiated when a company is facing severe financial difficulties and is unable to meet its obligations. The objective of administration is to implement a strategy that stabilizes the company's operations, addresses financial issues, and ultimately restores its viability. In an administration process, an appointed administrator will assess the company's situation, often seeking to negotiate with creditors and find ways to restructure the company's debts. By doing so, the administrator aims to safeguard jobs, maintain business operations, and increase the chance that the company's value can be preserved and eventually increased over time. This contrasts with other options that focus on immediate liquidation or debt settlement, which do not prioritize the continuation of the company's operations as the main goal.