Page 179 - Business Principles and Management
P. 179
Unit 2
PROVIDING BANKRUPTCY RELIEF
facts & All firms face the risk of failure. The free-enterprise system permits unsuccessful
figures businesses to file for bankruptcy as a means of protecting owners and others.
Bankruptcy is a legal process that allows the selling of assets to pay off debts.
Businesses as well as individuals can file for bankruptcy. If cash is not available
to pay the debts after assets are sold, the law excuses the business or individual
from paying the remaining unpaid debts. In such a case, all those to whom money
In 2005, more than 39,000 U.S.
is owed would very likely receive less than the full amount.
businesses filed for bankruptcy.
A bankruptcy judge can permit a company to survive bankruptcy proceed-
The state with the most busi-
ings if a survival plan can be developed that might enable the firm to recover.
ness bankruptcy filings was
As a result, after starting bankruptcy proceedings, many firms do survive.
California, with 4,236; the
However, bankruptcy carries serious consequences. The business will have a
state with the least filings
bad credit rating. A record of the unpaid debts will stay on file for 10 years,
was Virginia, with 7.
and the business may not file for bankruptcy again for eight years. As a result,
the business will have difficulty obtaining credit.
CHECKPOINT
List the four federal acts that are designed to promote fair
competition.
7.1 Assessment
UNDERSTAND MANAGEMENT CONCEPTS
Circle the best answer for each of the following questions.
1. A _________ exists when only one company provides a product or
service without competition from other companies.
a. oligopoly
b. monopoly
c. monogamy
d. none of the above
2. The ________ protects businesses from unfair methods of
competition.
a. Federal Trade Commission (FTC)
b. Federal Competition Commission (FCC)
c. Federal Transportation Commission (FTC)
d. Federal Monopoly Commission (FMC)
THINK CRITICALLY
Answer the following questions as completely as possible.
3. Explain why monopolies are bad for a society.
4. Describe how bankruptcy works for debtors and
creditors.
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