Chapter B, Problem B1.1CCO

Explanation of Solution

Bankruptcy:

It is the legal process that permits a borrower to work out an orderly plan to either settle arrears or settle assets and distribute them to creditors. Bankruptcy fraud mostly means to enter incorrect financial information on appeals and schedules.

FAO Inc has to declare bankruptcy:

FAO Inc has to declare bankruptcy because; the company cannot strive with the costs offered by other retailers on toys. Therefore, the company offered toys at higher prices than their competitors which might result in loss of customers and leads to loss of revenue.