There has been a major global crisis, and your company’s board of directors, Tar

Question

There has been a major global crisis, and your company’s board of directors, Target Corporation, has announced that the company is going bankrupt. No one could have seen this one coming. Your CEO has called you in to his office to start the insolvency process. Based on the latest published financial statements, your job is to come up with a plan that will be used to inform the company, its shareholders, and its creditors.

A. As your company’s controller, compose a summary report to your CEO advising him on the effects of the insolvency.

B. From a global perspective, what effects would the insolvency of your company have on the U.S. economy as well as the global economy (i.e., other countries)?

C. Construct a worksheet for the CEO showing the effects of the insolvency on the company, shareholders, and creditors.

Explanation / Answer

Answer

A company's insolvency can cause financial crisis. The financial crisis can affect the world in many ways. The hardest hit industries will be the banking, real estate, and construction industries. It may cause loss of many jobs and homes and increase in poverty. There may be also an impact on the global trading market and decline in overall international trade. Some countries will have a decline in their income and GDP. The prices of commodities will go down. Investment will also decline. Overall growth in business and investment will take a hit in world.

Following are the consequences of corporate insolvency

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