I need four responses of at least 150 words each for the below students discussions for this week. Also in the bold below are the questions the students at answering.
This is a juxtaposition discussion question. Choose a side. If you choose the green side, find resources support your response (remember to explore YouTube). You must also argue against the RED side. If you choose the red side, find sources to help support your position…but you also argue against the GREEN side. This is a complicated topic this week, so be sure to be thorough in your exploration of all the many facets. Your response should be 300 content words.
Corporate bailouts and corporate bankruptcy are both topics that companies try to stay away from. They are essentially an admittance by the owners or stakeholders in the company that there are currently major issues with operations and things need to change drastically if there will be any chance of success in the future. Corporate bailouts occur when the government or other financial institutions provide aid to corporations that would otherwise have to file for bankruptcy. Stock purchases and loans are two prime examples of corporate bailouts. Bailouts allow a business to continue to operate with the intentions of changing the way the company operates as well as make any procedural changes necessary to turn profitable once again. There is risk to bailouts however. Any shareholders who are aware that a bailout is coming will most likely sell their shares an all costs to avoid the eventual complete collapse. There are two major types of corporate bankruptcy. The first type is chapter 7. This occurs when a company immediately halts operations and is considered 100% out of business. In these circumstances, the company liquidates its assets and any money that is made is used to pay the debt owed to investors, creditors, etc. Chapter 11 bankruptcy is another major form of corporate bankruptcy. This type of bankruptcy occurs when a company restructures its organization and procedures from top to bottom with the hopes of continuing operations and turning profits in the future. Chapter 11 bankruptcy provides corporations with a chance to do things right and fix the wrongs that were proving to be so costly. Overall chapter 11 bankruptcy is better than chapter 7 bankruptcy since there is a chance for revival in the company.
If I were running a company that was faced with either accepting a bailout or filing for either chapter 7 or chapter 11 bankruptcy, I would most likely choose the bailout option since there is still a chance of bringing the business back to success, as well as the company never being linked to filing for bankruptcy. Even the idea of bankruptcy is bad for investors and can be a red flag for years to follow even if the company proves to have dug themselves out of the whole that they were in.
This week are introduced to two topic, corporate bailout and corporate bankruptcy. Corporate bailout is when a government, business, or individual step in to help a failing company. (Twin, 2019) This occurs if the company that is failing may have a large impact to the economy. A Corporate bankruptcy a company has failed in providing a positive income and must sell parts to to pay off some investors, but probably at a lower rate. (Troy, 2019) If I had to choose a side between the two, I would think corporate bankruptcy is an option that should be taken into account for these failing companies. The failing companies are failing companies are failing for a reason. Getting to the root of that reason and solving the problems is what will truly fix the company. Most of the time this can be a cause of poor management in finance, corruption within the business, or even cutting corners in product quality losing consumer trust. (Gattuso, 2008) Let’s say a government provides a bailout for a corporation, this not only uses the country’s tax dollars but also does not fix the main issues the corporation is having. With out fix the root cause the company has greater potential to fail again possibly bringing them to their current situation. Bankruptcy allows for the company to try and find the issues and correct them by renegotiating contracts, reducing debt, and streamline operations. (Gattuso, 2008) This is definitely important because it allows the company to reconstruct themselves for better alignment and profit. Bailing out a company from failing with taxpayers dollars does not seem like an adequate reason to spend that type of money. The taxpayers did not cause the issues and they should be the ones to save the company in the first place. The band aid of bailing out a company does not guarantee a change will come. Bankruptcy has the ability to show the business a change is needed while providing insurance on the company allowing them to try and redeem themselves.
Segel, T. (2019, June 25). Corporate bankruptcy: An overview. In Investopedia. Retrieved from https://www.investopedia.com/articles/01/120501.as…
Twin, A. (2019, June 25). Bailout. In Investopedia. Retrieved from https://www.investopedia.com/terms/b/bailout.asp
Gattuso, J. (2008, November 18) Bankruptcy, Not a Bailout, Is a Better Option for Automakers. In Youtube. Retrieved from https://youtu.be/6wKGODqsZ2o
This week is a difficult topic to take a side on because there are instances where both bailout and bankruptcy are effective. “Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable” (Miron, 2008); however, for this discussion I will take the side of bailout over bankruptcy. A bailout is defined as the act of providing financial assistance and resources to a failing company. Businesses and governments may receive a bailout which may take the form of a loan, the purchasing of bonds, stocks or cash infusions, and may require the recused party to reimburse the support, depending upon the terms. Bailouts should not be used as a back up for every company that is on the verge of bankruptcy because “a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government” (Miron, 2008).
Bailouts are typically only for companies or industries whose bankruptcies may have a severe adverse impact on the economy. The US Government has been providing bailouts since the Panic of 1972. “Since that time, the government has assisted financial institutions during the 1989 savings and loan bailout, rescued insurance giant American International Group (AIG), funded the government-sponsored home lenders Freddie Mac and Fannie Mae, and stabilized banks during the 2008 “too big to fail” bailout, officially known as the Emergency Economic Stabilization Act of 2008 (EESA)” (Twin, 2019). Another recent bailout was for the “big three” auto makers: Ford, GM, and Chrysler. Economists say that if any one of the “big three” had gone bankrupt it would have started an avalanche of smaller companies, such as car part suppliers, and costing hundreds of thousands of people their jobs.
Miron, J. A. (2008). Commentary: Bankruptcy, not bailout, is the right answer. Retrieved from http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html.
The great debate: Bailout vs. bankruptcy. (2008). Automotive News, 83(6336), 54. Retrieved from https://search-proquest-com.ezproxy1.apus.edu/docv…
Twin, A. (2019). Bailout Money Helps Failing Businesses and Countries. Retrieved from https://www.investopedia.com/terms/b/bailout.asp.
Corporate bailouts or Corporate bankruptcy? That is the question and what a controversial question it is. Personally, I must side with Federal and Corporate bailouts, and not necessarily to support CEOs or upper echelon leaders in management but for the hundreds and thousands of employees who would be impacted by bankruptcy. The second and third order effects would be losses of jobs, the amount of unemployment issued out, local businesses losing revenue and the collapsing of the economy which could take decades to recover. Although, I dislike the idea of using taxpayer dollars to bailout institutions, I happen to work in a field that shows frivolous spending of taxpayer dollars on other programs.
Another benefit for Corporate bailouts is that the government doesn’t just simply lend money to these failing companies, but it is investing in them by taking ownership stakes. In many cases, the government essentially is buying shares of stock much like ordinary investors do in their trading accounts and later sell those shares of stock for a large profit a few years down the road. This process allows the government to recoup dollars and eventually spend those funds on the original priorities.
Corporate Bankruptcy can sometimes be misperceived as the easy button. It allows a company to reorganize and restructure its financial affairs. It provides a contract between the debtor and its creditors as to how it will operate and pay its obligations in the future. Downsizing of the debtor’s operations is discussed in order to free up assets and liquidating plans are arranged to provide a plan for a total shutdown and the sale of the remaining properties. All of this being conducted while the workforce suffers to find new employment, losses of retirement funds, shares and stocks and the local economy suffers tremendously.
Again, with researching both bailouts and bankruptcy and having personal knowledge on how our government spends money, I chose bailouts to support our people.