Ross. Westerfield. Jaffe. Jordan Chapter 30 Test

Ross. Westerfield. Jaffe. Jordan Chapter 30 Test -...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 30-1CHAPTER 30 Financial Distress Multiple Choice Questions: I. DEFINITIONS FINANCIAL DISTRESS c 1. Financial distress can be best described by which of the following situations in which the firm is forced to take corrective action. a. Cash payments are delayed to creditors. b. The market value of the stock declines by 10%. c. The firm's operating cash flow are insufficient to pay current obligations. d. Cash distributions are eliminated because the board of directors considers the surplus account to be low. e. None of the above. Difficulty level: Easy INSOLVENCY c 2. Insolvency can be defined as: a. not having cash. b. being illiquid. c. an inability to pay one's debts. d. an inability to increase one's debts. e. the present value of payments being less than assets. Difficulty level: Easy STOCK-BASED INSOLVENCY b 3. Stock-based insolvency is a: a. income statement measurement. b. balance sheet measurement. c. only a book value measurement. d. Both A and C. e. Both B and C. Difficulty level: Easy FLOW-BASED INSOLVENCY e 4. Flow-based insolvency is: a. a balance sheet measurement. b. a negative equity position. c. when operating cash flow is insufficient to meet current obligations. d. inability to pay ones debts. e. Both C and D. Difficulty level: Easy 30-2FINANCIAL RESTRUCTURING d 5. Financial restructuring can occur as: a. a private workout. b. an employee buy-out. c. a bankruptcy reorganization. d. Both A and C. e. Both B and C. Difficulty level: Medium FINANCIAL DISTRESS d 6. Financial distress can involve which of the following: a. asset restructuring. b. financial restructuring. c. liquidation. d. All of the above. e. None of the above. Difficulty level: Easy RULES OF ABSOLUTE PRIORITY c 7. APR, as it relates to financial distress, means the rules of: a. absolute profitability. b. arbitration priority. c. absolute priority. d. absolute profitability. e. automatic profitability. Difficulty level: Medium REORGANIZATION AND LIQUIDATION c 8. The difference between liquidation and reorganization is: a. reorganization terminates all operations of the firm and liquidation only terminates non-profitable operations. b. liquidation terminates only profitable operations and reorganization terminates only non-profitable operations. c. liquidation terminates all operations and reorganization maintains the option of the firm going concern. d. liquidation only deals with current assets and reorganization only consolidates debt. e. None of the above. Difficulty level: Medium 30-3II. CONCEPTS FINANCIAL DISTRESS c 9. A firm that has a series of negative earnings, sales declines and workforce reductions is likely head to: a. a change in management. b. a merger....
View Full Document

Page1 / 12

Ross. Westerfield. Jaffe. Jordan Chapter 30 Test -...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online