Question

Which type of asset from each pair do you think would lead to the best recovery (the amount of money the creditor receives in liquidation), if the company that owned the asset went into Chapter 7 bankruptcy? a. an Office building or a brand name b. Finished inventory in a commodity product or finished inventory in a warrantied, complex manufactured product c. a patent with 15 year life remaining or un patented engineering “know-how” Provide a couple of sentences describing your reasoning for each choice.

Answer 1

Chapter 7 of bankruptcy will be meaning that the company will be having a liquidation bankruptcy, and all the Asset has to be liquidated and those assets will be selected who have the highest realizable value.

A. An office building or a brand name-the office building will be having higher realizable value because it is a physical asset and it will generating value through buyers but brand name could not be having any kind of buyer because the company has already lost the reputation

B. Finished inventory in a commodity product or finished inventory in warranted complex manufactured product-finished inventory in commodity product will be preferred because these will be easily sold and those warranty product will not be having any significant value because the company is already in the liquidation process and the company is not likely to sustain

C . Patent with 15 year life remaining or unpatented engineering know how- A patent with 15 year life remaining will have higher realizable value and best recovery chances, because it is already registered patent and there is a 15 year life value associated with it, also for an unpatented engineering, it has no value embedded with it because it has not been even patented yet