IFM10 Ch 25 Test Bank

IFM10 Ch 25 Test Bank - CHAPTER 25 BANKRUPTCY,...

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BANKRUPTCY, REORGANIZATION, AND LIQUIDATION (Difficulty: E = Easy, M = Medium, and T = Tough) Note: None of the questions in this chapter are algorithmic. True/False Easy: (25.2) Bankruptcy issues Answer: a Diff: E 1 . A central question that must be addressed in bankruptcy proceedings is whether the firm's inability to meet scheduled interest payments results from a temporary cash flow problem or from a potentially permanent problem caused by falling asset values. a. True b. False (25.4) Bankruptcy claimants Answer: b Diff: E 2 . In the event of bankruptcy under the federal bankruptcy laws, debtholders have a prior claim to a firm's income and assets before both common and preferred stockholders. Moreover, in a bankruptcy all debtholders are treated equally as a single class of claimants. a. True b. False (25.5) Doctrine of fairness Answer: a Diff: E 3 . The basic doctrine of fairness under bankruptcy provisions states that claims must be recognized in the order of their legal and contractual priority. a. True b. False (25.5) Standard of feasibility Answer: a Diff: E 4 . The primary test of feasibility in a reorganization is whether the firm's fixed charges after reorganization can be covered by its projected cash flows. a. True b. False (25.7) Social issues and bankruptcy Answer: b Diff: E 5 . Bankruptcy plays no role in settling labor disputes and product liability suits. Such issues are outside the bounds of bankruptcy law and are covered by other statutes. Chapter 25:
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This note was uploaded on 04/19/2010 for the course BA 462 taught by Professor Aziz during the Spring '10 term at Humboldt State University.

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IFM10 Ch 25 Test Bank - CHAPTER 25 BANKRUPTCY,...

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