Why Is It Disadvantageous for a Company to Carry on Business

question 13

Multiple Choice

Why is it disadvantageous for a company to carry on business as usual for too long?

• A) The company will appear irresponsible to its long-term customers.
• B) The company will end up engaging in unfair trade practices.
• C) The company will fail to develop business systems that allow for continuous improvement.
• D) The company will start to produce lower quality products and experience a reduction in its market share.

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Definitions:

Composition

The makeup or structure of something, in finance it might refer to the mix of assets in a portfolio or ingredients of a financial product.

Creditors

Entities or individuals to whom money is owed by a person or company.

Absolute Priority Rule

A principle in bankruptcy proceedings that senior creditors are paid before junior creditors and shareholders.

Liquidation

Termination of the firm as a going concern.