True or False, and Explain: It is healthy for the economy to have companies go bankrupt.
True or False, and Explain: It is healthy for the economy to have companies go bankrupt.
Homework Answers
Answer: True
Bankruptcy is a protection to companies getting out of their huge debts. Once such protection is there, they feel free and take risks on investments in challenging projects. This increases GDP of the country, reduces unemployment, and improves overall growth of the economy. If there was no bankruptcy and the company fails to repay debts, company’s assets could have been seized by the lenders or creditors, making a total loss to the company. Bankruptcy saves there.
On the other hand, lenders and creditors are also protected since the recovery of money is still there in bankruptcy. They might be little free granting credit to companies.
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True or False, and Explain: It is healthy for the economy to
have companies go bankrupt.
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