Final answer:
When Alby Ltd. opts to take a new loan from the bank to reconstruct its finances instead of declaring bankruptcy, the process is called Financial Reorganization, a method to restructure debts and manage payments more effectively.
Step-by-step explanation:
When Alby Ltd decides to take a loan from the bank to rebuild the company rather than filing for bankruptcy, this is referred to as Financial Reorganization. This process involves negotiating with creditors to restructure the firm's financial obligations, which may include taking out a new loan to pay off existing debts, and often entails revising the terms associated with the firm's debts, like interest rates and payment schedules, to create a more manageable financial situation.
A bank loan for a firm is akin to a personal loan for large purchases such as cars or houses. The firm will promise to repay the borrowed amount along with an agreed rate of interest over a set period. If the firm cannot honor the loan repayments, it risks legal action which can force the sale of its assets to cover the debts.