Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Question
Chapter 25, Problem 2Q
Summary Introduction
To discuss: The reason why creditors accept plan for financial rehabilitation rather than demand liquidation of the business.
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Why do creditors usually accept a plan for financial rehabilitation ratherthan demand liquidation of the business?
If someone owes you money, that person or business goes into bankruptcy why would it make a difference if you were a secured or unsecured creditor ?
Bankruptcy issues:
1. Why do creditors accept a plan for financial rehabilitation rather than demand liquidation of business?
2. Would it be a sound rule liquidate whenever the liquidation value above the value of a corporation is a going concern? Discuss
Chapter 25 Solutions
Intermediate Financial Management (MindTap Course List)
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- Which one of the following is an indirect cost of bankruptcy? The fees that creditors need to pay to their lawyers to help them recover their credit Court fees Administrative delays that creditors experience in recovering their money Workers spending their time searching for alternative employment opportunitiesarrow_forwardWhat are the Investing factors, Financing factors and Operating factors of bankruptcy?arrow_forwardWhat are the risks to the lender if a borrower declares bankruptcy?arrow_forward
- Choose the correct. What is a cram down?a. An agreement about the total amount of money to be reserved to pay creditors who have priority.b. The bankruptcy court’s confirmation of a reorganization even though a class of creditors or stock-holders did not accept it.c. The filing of an involuntary bankruptcy petition, especially by the holders of partially secured debts.d. The court’s decision as to whether a particular creditor has priority.arrow_forwardWhat is a cram down?a. An agreement about the total amount of money to be reserved to pay creditors who have priority.b. The bankruptcy court’s confirmation of a reorganization even though a class of creditors or stockholders did not accept it.c. The filing of an involuntary bankruptcy petition, especially by the holders of partially secured debts.d. The court’s decision as to whether a particular creditor has priority.arrow_forwardIf a bankruptcy is deemed likely to occur and is reasonably estimated, what would be the recognition and disclosure requirements for the company?arrow_forward
- What is liquidation (in bankruptcy)?arrow_forwardWhich one of the following is a direct bankruptcy cost? A.Loss of customer goodwill resulting from a bankruptcy filing B.Legal and accounting fees related to a bankruptcy proceeding C,Any financial distress cost D.Management time spent on a bankruptcy proceedingarrow_forwardWhat is holdout problem (in bankruptcy)?arrow_forward
- Which of the following statements regarding bankruptcy is not true? A. Companies can be forced into involuntary bankruptcy by the creditors. B. Companies cannot be forced into involuntary bankruptcy by the creditors. C. Bankruptcy can result in a company liquidating its assets with the distribution of those proceeds to creditors. D. Bankruptcy can result in financial reorganization and continued existence.arrow_forwardDefine Bankruptcy?arrow_forwardHow much is the net free assets? How much is the estimated deficiency to unsecured creditors? What is the estimated recovery percentage of unsecured non-priority creditors?arrow_forward
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