Business, 21.09.2019 01:50 jeterboi

The owners of a firm facing a high probability of bankruptcy prefer to invest in projects, because

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The owners of a firm facing a high probability of bankruptcy prefer to invest in $\fbox{risky}$ projects because $\fbox{the shareholders have little to lose and might win if successful}.$

Further Explanation:

Bankruptcy: Bankruptcy refers to the legal process where the person or company seeks relief from the court because they are not able to pay their debt. The company and debtor both can file for bankruptcy in the court.

If the firm is facing bankruptcy, it means that it is heavily laden with debt. The profitability of the firm is very low since it is not able to pay its debts. If the firm goes for bankruptcy, the shareholder will receive a cents for a dollar. But if the firm accepts the risky project and successfully implement it, then it will improve the condition of the firm. The firm might be able to pay its debts.

Therefore, the firm that is facing a high chance of bankruptcy prefers to invest in risky projects because the shareholders might receive their money back if the project is successful.

Learn more:

1.Learn more about the value of the investment

2.Learn more about the value of the bond

3.Learn more about the present value of the investment

Answer details:

Grade: Senior School

Subject: Business Studies

Chapter: Financing decisions

Keywords: Owners of a firm, high probability of bankruptcy, risky projects, investment, bankruptcy, the shareholders, have, little too, lose, profit, loss, creditors, bank loan.

Answer from: Quest

answer: e

explanation:

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

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The owners of a firm facing a high probability of bankruptcy prefer to invest in projects, because...