Nobody downloaded yet

Value. Bankruptcy. Investment Price - Essay Example

Comments (0) Cite this document
Summary
Value. Bankruptcy. Investment Price. Table of Contents Answer 2 4 Answer 3 6 References 9 Answer 1 A company that is incapable of fulfilling its contractual obligations and fails to make the payments to its creditors generally files bankruptcy protection at the court…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.6% of users find it useful
Value. Bankruptcy. Investment Price
Read TextPreview

Extract of sample
"Value. Bankruptcy. Investment Price"

Download file to see previous pages On the other hand, the US system is supposed to be more debtor-friendly, where the courts play a significant role in the restructuring of the distressed company (Bourguignon & Pleskovic, 2007). In the US, bankruptcy is managed under the Bankruptcy Code, formed by the Bankruptcy Reform Act of 1978. Under this Act, a company could be restructured and reorganized or else liquidated. A financially distressed company can get protection from the creditors under the Chapter 11 of the Bankruptcy Code. The company can then attempt to rise above its financial hardships and also sort out the payments to its various creditors. Conversely, if the company files under Chapter 7 of the Bankruptcy Code, the assets of the company are liquidated and the proceeds are allocated to the creditors. The major trade-off in the bankruptcy act is between providing protection to a distressed company and ensuring bondholders with adequate security to extend credit. Providing protection to the financially distressed company from its creditors and helping them to start afresh is an important driver of private enterprises. Many entrepreneurs would not take up the risk of forming a business if they had a possibility of facing unrestricted liability. However, the partial liability cancellations and bailouts of the bankrupt companies hurt the interest of the bondholders because they receive only a fraction of the value actually owed. Many a times, the liquidation of the company’s assets also does not help the creditors to acquire the total amount they owed to the company. This consequently makes the creditors more risk averse and the restructured company finds it difficult to locate investment post its bankruptcy. Therefore, regardless of liquidation, reconciliation of liability claims or Chapter 11, the lenders do not get back what they originally owed to the company (Damodaran, 2005). Answer 2 A company is said to be bankrupt when it is not capable of fulfilling its contractual liabilities. The assets of such a company are generally liquidated and the earnings from the liquidation process are utilized to meet the overdue claims. The cost involved in the process of going bankrupt is obscure and hence difficult to quantify. The legal expenditures involved are known as the direct cost of bankruptcy. These costs occur in the form of cash outflows at the moment of bankruptcy of the company. Therefore, the direct costs of bankruptcy consist of legal as well as administrative expenditures and also the interest payments for the payment of the overdue cash flows. However, the major part of the bankruptcy cost takes place prior to the company’s bankruptcy declaration. The direct costs of bankruptcy of large companies are considerably small considered to their indirect costs of bankruptcy. When the suppliers, the buyers, the consumers and also the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Value. Bankruptcy. Investment Price Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Value. Bankruptcy. Investment Price Essay Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/finance-accounting/1431402-value-bankruptcy-investment-price
(Value. Bankruptcy. Investment Price Essay Example | Topics and Well Written Essays - 1000 Words)
Value. Bankruptcy. Investment Price Essay Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/finance-accounting/1431402-value-bankruptcy-investment-price.
“Value. Bankruptcy. Investment Price Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1431402-value-bankruptcy-investment-price.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Bankruptcy
...as it increases the risk and poses threats for the creditors. This in turn initiates the vicious cycle of destruction. As the risk for default is high provided that debtors are allowed to discharge their debt in cases of insolvency, the creditors provide the credit at higher interest rates. This increases the cost of credit for several debtors. Also, this policy does not allow high-risk debtors to obtain creditors. As the costs increases, it increases the probability of debtors going bankrupt. This in turn leads to debtors discharging their debt. For it fraudulent and corrupt nature, this policy has been under deliberation by the Congress (Zywicki). The third objective of the bankruptcy laws was to preserve the...
9 Pages(2250 words)Research Paper
Detroit Bankruptcy
... Accounting Issues that contributed to the Detroit Bankruptcy Introduction Detroit became the largest interms of size and population in the United States history to file for chapter 9 municipal bankruptcy in July, 18, 2013 with an estimated debt of $18-20 billion. The proceeding provides protection to financially distressed municipalities from creditors through the creation of a financial plan aimed at settling the debt. The purpose of the filing was to extend the loan terms while maintaining a lid on the interest rates. The announcement of bankruptcy by Detroit is a prophesied case. The liquidation of a municipal’s assets cannot happen as a result of the request of a creditor. A municipality is under the state’s jurisdiction... as it is...
5 Pages(1250 words)Essay
Bankruptcy prediction
...challenge towards full use of all available data in a better model for the bankruptcy process. Share prices fluctuations are in an obvious way to look at distressed listed companies claimed by Morris Richard (1998). However, Gilbert R L et al (1990)'s study show that there are overlapping financial characteristics of bankrupt and distressed firms, therefore other factors such as incentives of managers, stockholders, etc should be considered when decision made by distress firm. The estimation model by Korteweg, Arthur G (2007) used a panel dataset of monthly market values of debt and equity over 10 years. He then generalized empirical model for default probability, except leverage, such...
13 Pages(3250 words)Research Paper
Bankruptcy
...and property. KEY INDICATORS OF PREDICTING BANKRUPTCY The key indicators of bankruptcy prediction are stated below: If a company does not update its financial records and reporting then there are probable chances that in the near future a company might end up bankrupt. (Tenk) Sharp increase in the cost of capital due to internal inefficiency or macro level factors like recession in the economy also increases the chances of bankruptcy. Shortfalls in dividend payment make a significant impression on the stock prices and also it shows the shareholders are not satisfied with the company's policies. If the company is not ready for intense competition then its likelyhood of...
4 Pages(1000 words)Essay
Bankruptcy Law
...clean and he will be able to keep certain exempt assets. For example, he will be able to keep his car (as long as the value of the car isn't excessively high) and car payments will be affordable because the credit card debts are discharged. One problem is that more information about his financial situation might prove that he cannot file Chapter 7 bankruptcy. An individual is forced to file into a different chapter of bankruptcy if his income is above the median income for his state and family size. If his income is higher than the median income for his state he can afford and will have to file chapter 13 bankruptcy which is basically a debt consolidation type...
2 Pages(500 words)Essay
Personal Bankruptcy
...to mention any additional income such as those from family is expected in the following year. A petitioner whose bankruptcy case had been previously adjudicated will have to wait for 8 years before filing another claim. The new act also allows conversions of liquidation into wage earner plans and liquidation cases in which the debtor’s income falls under a certain level will only be considered. Petitioner can use the exemptions allowed by the state only if they have resided in the state for at least 730 days. With regard to their houses, the creditors are allowed to exempt the first $125,000 of the value only if the home was purchased within a period of 1215 days. In case a tenant, who is using the home...
2 Pages(500 words)Essay
Investment value
...Education is still valued by a number of people in this country. Despite the financial crisis, parents still save up for their children’s education by investing in their children’s college funds. There are a number of ways to invest one’s money and that includes stock trading, mutual funds, cash bonds, and time deposits, among others. For the problem at hand, Grandma has $50,000 to invest for Kid’s college education. After some careful planning, she decided to invest her money in a Saving Bond which offers a fixed annual interest rate of .60%, compounded semi-annually, and will mature after 20 years, the same time at which Kid will be going to college...
1 Pages(250 words)Assignment
Bankruptcy
... Chapter 7 bankruptcy also known as liquidation bankruptcy is the common bankruptcy chapter across the United States. It usually involves a trustee selling a debtor’s non-exempt assets and turning over the proceeds to the creditors. In this regard, the debtor is required to gather all their financial records properly before filing the petition. Chapter 7 bankruptcies can be filed by businesses which are troubled by debts or those which are unable to pay off their creditors. In the same way individuals who reside or own property in the country can file for chapter 7 bankruptcy. However, individuals who have had their bankruptcy cases dismissed in the last 180 days do not qualify for this type of bankruptcy. People essentially file... for...
1 Pages(250 words)Research Paper
Bankruptcy
...Bankruptcy Bankruptcy can be defined as a process with which a business can eliminate or repay part of or all debt, but under the safeguard of the federal bankruptcy court (Cross & Miller, 2011, p. 371). Accordingly the Bankruptcies are categorized into two: the Liquidation and the reorganization types. The two categories engross the five bankruptcy types: chapter7-Liquidation, chapter 13-individual debt adjustment, chapter 11-reorganisation, chapter 12-Family farmer, and chapter 9- municipality (Distenfield, 2005, p. 47). All five chapters are distinct as each defines each obligation of debtors and as determined by bankruptcy courts. Chapter 7 Bankruptcy is also known as straight bankruptcy in which an individual or a corporation... will...
2 Pages(500 words)Essay
Bankruptcy
...ability to the working staff to become decisive on whether to invest more in the company or just simply stop. It allows the subordinates to know the conditions in which they are going to work (Miller 2012). If I came to know that my company is about to collapse then the first sensible thing to do is to file bankruptcy. Filing bankruptcy will allow me to get creditors off my back or negotiate with them to get a settlement in order to return only a certain percentage of the amount of money owed by the company. It also gives a certain time period in which the creditors will not be able to take any action against the company which will buy the entrepreneur some time to find new sources of...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Essay on topic Value. Bankruptcy. Investment Price for FREE!
Contact Us