Reference no: EM132465923

Question 1: The initial exclusive period is how many days:

• 90
• 30
• 120
• None of the above

Question 2: Which of the following are drivers of economic failure?

• Revenues less than costs
• Return on investment below costs of capital
• Profitability below expected levels
• All the above

Question 3: Whether bankruptcy is entered either voluntarily or involuntarily the major difference by Chapter 7 and Chapter 11 is:

• that liquidation occurs in Chapter 11 but reorganization is the objective under Chapter 7
• that there is no priority of claims under Chapter 11
• that liquidation occurs in Chapter 7 but reorganization is the objective under chapter 11
• no lawyers fees are necessary under Chapter 7

Question 4: Indirect costs of bankruptcy are borne principally by

• Bondholders
• Managers
• Shareholders
• Board of Directors

Question 5: Bankruptcy reorganizations are used by management to:

• Forestall the inevitable liquidation in all cases
• Provide time to turn the business around
• Allow the courts time to set up an administrative structure
• All of the above

Question 6: The difference between liquidation and reorganization is:

• Reorganization terminates all operations of the firm and liquidation only terminates non-profitable operations.
• Liquidation terminates only profitable operations and reorganization terminates only non-profitable operations.
• Liquidation terminates all operations and reorganization maintains the option of the firm going concern.
• Liquidation only deals with current assets and reorganization only consolidates debt.

Question 7: Prepackaged bankruptcies are:

• Described as a combination of a private workout and a liquidation
• The easiest way to transfer wealth to the shareholders
• Described as a combination of a completed private workout and the formal bankruptcy filing
• All of the above.

Question 8: Insolvency can be defined as:

• not having cash
• being illiquid
• an inability to pay one's debts
• an inability to increase one's debts

Question 9: A firm in financial distress that reorganizes:

• continues to run the business as a going concern
• must have acceptance of the plan by the creditors
• may distribute new securities to creditors and shareholders
• All of the above

Question 10: Two in-court options for dealing with financial distress of a firm are:

• Merger and acquisition
• Liquidation and reorganization
• Leasing and LBO
• Issue stocks and bonds