Explore BrainMass

Financial Distress and Bankruptcy

Accounts Receivable Journal Entries-Writeoff and Recovery

Rupert Manufacturing Co. sold $20,000 of merchandise to Mr. J. Hart on May 14, 2007, on account. The company attempted collection efforts starting in October of the same year. Hart filed for bankruptcy on November 18, and the company wrote off his account receivable at that time. On December 29, 2007, Rupert Manufacturing re

Bankruptcy Trustee

Which of the following is not an expected function of a bankruptcy trustee? A Filing a plan of organization. B Recovering all property belonging to a company. C Liquidating noncash assets. D Distributing assets to the proper claimants.

Blockbuster Bankruptcy and Survival Strategy

In the light of Strategic Surveillance we are discussing in our class this week: Can anyone comment on Blockbuster's possible bankruptcy. What happened? What, if any, can be done now strategically to survive?

Business Law: Important information about Bankruptcy

A committee chairman has revealed that your supervisor wants you personally to prepare a report discussing the following options for a client who is in serious business trouble. Your firm's client just recently revealed that his company was $2.9 million in debt and that his company is not incorporated. He has reluctantly asked i

Ethical Challenges

1. What are some ethical challenges the financial services industry faces? What can be done to mitigate the potential for unethical behavior in the financial services industry? 2. Distinguish between ethical and unethical behavior in a bankruptcy setting 3. Explain ethical challenges an accountant could face in recognizing

Reporting 2008 Tax Return

The question is as follows: Celeste had one of her best employees leaving town to get away from a troublesome ex husband. In order for her friend to establish a business elsewhere, in March 2007 Celeste loaned her $7,000 on a 6% note to be paid back in one year. On December 30, 2008 Celeste found out that her employee had fi

Which of the following is most correct?

Which of the following statements is most correct? a. Our bankruptcy laws were enacted in the 1800s, revised in the 1930s, and have remained unaltered since that time. b. Federal bankruptcy law deals only with corporate bankruptcies. Municipal and personal bankruptcy are governed solely by state laws.

Corporate Finance sample questions (cash flow, leverage, NPV)

I am seeking assistance with the following problems... #2 Grommit Engineering expects to have net income next year of $20.75 million and free cash flow of $22.15 million. Grommit's marginal corporate tax is 35%. a. If Grommit increases leverage so that its interest expense rises by $1 million, how will its net income change?

WACC / Optimal debt & capital structure

A Firm is unleveraged and has a constant EBIT of $2 million per year. Tax rate is 40% and market value is $12 million. Debt is being considered to buy back stock. The present value of financial distress costs are $8 million and the probability of distress would with leverage according to the following: $2,500,000 of debt -0%, $5

Asymmetric Information and Capital Structure

Info System Technology (IST) manufacturers microprocessor chips for an appliances and other applications. IST has no debt and 100 million shares outstanding. The correct price for these shares is either $14.50 or $12.50 per share. Investors view both possibilities as equally likely, so the share currently trade for $13.50. I

"How bankruptcies can affects small business?"

Write a problem statement: Develop two, succinct problem statements that are at least two paragraphs long. Use electronic (full-text) databases as much as possible in your research. Please use APA style and references. My research is on: "How bankruptcies can affects small business?"

Tax Issues for Sheryl's ownership of Barney Corporation stock

On January 12 of the current year, Barney Corporation, a publicly-held corporation, files for bankruptcy. During the bankruptcy proceedings it is determined that creditors will only receive 10% of what they are owed and that the shareholders will receive nothing. Sheryl, a calendar-year taxpayer, purchased 1,000 shares of Barney

Beacon Computer Proposed Distribution of Liquidating Value

When the Beacon Computer Company filed for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code, it had the following balance sheet information: Liquidating Value Claims Trade Credit $3000 Secured mortgage notes $6000 Senior debentures $50

Question about Financial distress

Good time company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 60 percent and the probability of a recession is 40 percent. It is projected that the company will generate a total cash flow of 250MM in a boom year and 100MM in a recession. The company's

11 MCQ: Finance, Capital Structure, Leverage, Debt financing,

Please show a detail (step and explanation) as how to get the result. Quiz 8 Chpt. 12 & 13: Capital Structure 1. If an airline began to experience reductions in ticket sales associated with news of its difficulty in servicing its debt (making debt payments), this would be an example of a. agency problems b. a tax shiel

Current economic condition, future growth, convertible securities, bankruptcy.

1. Describe the current economic and financial condition we are facing today. How will the current economic and financial condition impact the future growth of businesses? If you were raising funds from outside (today) to support the growth of a company, why would you use warrants in debt financing. Explain how your financing st

Financial Statement Analysis

1. Economic theory teaches that difference in market returns must relate to differences in which of the following? a. Book value b. Perceived risk c. Price-earnings ratio d. Bankruptcy risk 2. Market equity beta measures the covariability of a firm's returns with the returns of which of the following? a. All industry compe

Loss of customers and financial distress

Which type of firm is more likely to experience a loss of customers in the event of financial distress: a. Campbell Soup Company or Intuit, Inc. (s maker of accounting software)? b. Allstate corporation (an insurance company) or Reebok International (a footwear and clothing firm)?


It will be interesting to see what the creditors for Chrysler do - if they agree to erase most of the debt that is currently on their balance sheet. Now, what will happen with GM?

Auto industry

Please help with the following problem. The auto industry does need the bail out. It is necessary to protect the millions of jobs across the US (one out of ten American jobs is associated with the auto industry). It also has made for the huge dependence on foreign fuel and has damaged the economy. So their bankruptcies wo

Financial leverage problem

The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Financial leverage is not always bad, however; it can increase the shareholders' r

Times interest earned ratio for Manor Corp.

Manor Corp. has $ 500,000 of debt outstanding and it pays an interest rate of 10% annually. Manor's annual sales are $2 million, and its average tax rate is 30% and its net profit margin is 5%. If the company does not maintain a TIE ratio of at least 5 times, its bank will not renewal the loan, and bankruptcy will result. What i

Auditors and their predictions about bankruptcy of a client

For discussion purposes counter the statement that it is worse for auditors to incorrectly predict bankruptcy than when auditors fail to predict bankruptcy. Do you think the current bank crisis and its negative credit crunch on the entire economy resulting in many small, medium and some big businesses closing their doors is

In 2005, the U.S. Congress approved a major reform of federal bankruptcy laws. On the Internet, do research on "bankruptcy reform" or equivalent terms. Answer the following questions:

In 2005, the U.S. Congress approved a major reform of federal bankruptcy laws. On the Internet, do research on "bankruptcy reform" or equivalent terms. Answer the following questions: What were the major reforms made to federal bankruptcy laws in 2005? What particular industry probably led the drive to encourage Congress

Enron's Case study


Healthcare cost/benefit analysis

There are 45 million Americans with no health insurance in this country. After (or before) healthcare services are provided, should hospitals aggressively attempt to collect the outstanding balances of the uninsured or just write it off as charitable care? Perform a cost/benefit analysis to justify your response.

Southwest Development bankruptcy and Ms. Harper's investment

Merideth Harper has invested $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of payments, if any, by Ms. Harper in each of the following situations. 1.Southwest Development Company is a sole proprietorship owned by Ms. Harper. 2.Southw