What are the risks of doing so

Assignment Help Business Law and Ethics

Reference no: EM133201366 , Length: word count:700

Question: ANJ, Inc., a privately-held Delaware corporation with headquarters in Cambridge, Massachusetts, develops machinery used to test products in the pharmaceutical industry. ANJ markets its machinery exclusively through Phillips Industries. That is, Phillips purchases the machinery from ANJ and resells it to pharmaceutical companies.

These companies recently have substantially expanded their operations in Cambridge, and hence demand for ANJ's products is very robust. Phillips is encouraging ANJ to increase its output substantially to meet this demand. But, in order to do so, ANJ requires more space than it presently occupies, must hire more employees, and needs to purchase additional technology to develop its software. All of these needs mean that ANJ requires additional capital.

You are part of the management team that will meet with ANJ's lawyers and financial advisers and your task it to prepare recommendations for acquiring the needed capital. In preparation for that meeting, specify the advantages and disadvantages of ANJ securing that capital in the form of:
a. unsecured credit
b. secured credit
c. through the issuance of more shares.

Further address the following:

a. What are the advantages and disadvantages, from the perspective of the suppliers of capital, of investing in the various forms?

b. What are the advantages of distributing ANJ's products exclusively through Phillips, and what are the risks of doing so?

c. Suppose that after a substantial expansion, business turns down and, in fact, ANJ must file for bankruptcy. What forms might that bankruptcy take, and what are the prospects of recovery for unsecured creditors, secured creditors and shareholders?

Reference no: EM133201366

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