Question

BBB Company has been a successful manufacturer of quality electronics products for the past 20 years. It is a publicly traded company with 1 million shares outstanding. During the past three years, the company has fallen on hard times. Profit margins in the electronics manufacturing industry have been squeezed due to competition in Japan and China. For most of the company's history, research and development (R&D) costs have been a substantial portion of expenses. However, in the last three years, there have not been any R&D expenses. This may have led to the decline in perception of quality, for which customers have expressed concern.
Suppliers have also been complaining that BBB Company has bought increasing amounts of inventory on credit and has pressured them to loosen credit terms. However, the company shows a decreasing inventory over the last three years as sales have declined. Recently, the company CFO talked the local bank into increasing BBB's credit limit, and the company has used its entire line of credit. The CFO convinced the bankers that the current downturn in sales was temporary and that the company had a new product line that would be very lucrative.
With all its financial pressures, BBB recently decided to file for bankruptcy. It cannot cover the interest payments on loans, nor can it meet its growing accounts payable balance. As creditors begin to seek monetary recovery through assets, they discover that there seems to be very little inventory, and expenses seem extraordinarily high in the current year. Also, some cash (from loans) has disappeared without leaving a paper trail.

Required:
a. What evidence indicates that the company has been planning to declare bankruptcy? If so, for how many years?
b. If this bankruptcy was fraudulently planned and assets have disappeared, will BBB Company still be allowed to declare bankruptcy?

Answer 1

Answer:

Answer 1.

Beneath referenced pointers show that organization arranged the liquidation for recent years or something like that.  

• The way that there had been no interest in R&D for recent years which more likely than not brought about noteworthy cost putting something aside for the organization.  
• BBB bought expanded size of stock on layaway from providers in recent years which is a warning.  
• Indeed, even without bringing about any R&D cost for recent years, CFO of BBB moved toward the bank to expand the credit line of the organization and utilized all credit line without legitimate desk work.  
• CFO erroneously guaranteed the brokers about new product offering so as to look for advances/increment credit line.  
• Indeed, even with diminished deals, organization was indicating lower supply of stock. They more likely than not been offering the stock at cost to outsider or shrouded it at an undisclosed area to dupe the providers.  
• With no interest in R&D and declining business possibilities, organization couldn't have given new offers for subsidizing  

Answer 2.

Yes, even if it is a fraudulent filing for bankruptcy, BBB organization despite everything can select to petition for financial protection or BBB can close the business through and through and escape with the reserve funds and continues from the offer of the stock. Indeed, even leasers and providers reserve the option to petition for automatic insolvency against the BBB in the event that BBB doesn't seek financial protection.  

It thoroughly relies upon the BBB Company, in the event that it selects to declare financial insolvency under section 7, or 11 of the liquidation code. Be that as it may, it is just under section 11 liquidation procedures of the chapter 11 court it very well may be set up that BBB's aim and untrustworthy strategic policies establishes to insolvency misrepresentation.