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Needsalift, Inc. has $10 million in funds to distribute to its unsecured creditors Two sets of possible claims are presented below Case ICase II Unsecured bonds$ 2 million

Needsalift, Inc. has $10 million in funds to distribute to its unsecured creditors. Two sets of possible claims are presented below.

 

Case ICase II

Unsecured bonds$  2 million              $  4 million

Notes payable to bank$  6 million              $  2 million

Accounts payable$  4 million              $  6 million

Unpaid balance of second mortgage$  2 million              $  6 million

$14 million$18 million

 

 

27.For Case I, how much will the bank receive for its notes payable claim?

a.$3.75 million

b.$4.29 million

c.$6.00 million

d.nothing.

 

 

 

28.For Case I, what settlement will the unsecured bondholders receive?

a.Nothing

b.$2 million

c.$1.43 million

d.$1 million

 

 

 

29.For Case II, what settlement will the unsecured bondholders receive?

a.$4 million

b.$3.25 million

c.$2.22 million

d.Nothing

 

 

 

30.For Case II, what settlement will the accounts payable holders receive?

a.$3 million

b.$3.34 million

c.$4.65 million

d.$6 million

 

 

 

31.Which factor in the Z-score model will most affect the likelihood of bankruptcy predicted?

a.working capital to total assets ratio

b.EBIT to total assets ratio

c.market value of equity to book value of equity ratio

d.retained earnings to total assets ratio

 

 

 

32.Polaroid’s bankruptcy filing is an example of a failure due to

a.business cycle downturn

b.corporate maturity

c.poor financial actions

d.illiquidity

 

 

 

33.If a company’s financial position is characterized by current liabilities greater than current assets, it is

a.bankrupt.

b.illiquid.

c.insolvent.

d.liquidated.

 

 

 

34.In order to move forward in a financial crisis without many of the costs of legal bankruptcy, a firm may seek

a.a consent procedure.

b.a cram-down procedure.

c.a chapter 11 reorganization.

d.a voluntary settlement.

 

 

 

35.A firm that is subject to Chapter 7 of the Bankruptcy Reform Act is one that

a.is in involuntary reorganization.

b.is facing a cram-down procedure.

c.is to be liquidated.

d.is seeking a recapitalization.

 

 

 

36.The debtor in possession (DIP) is

a.the lenders who are owed money by the bankrupt firm.

b.the trustee of the bankrupt firm.

c.the bankrupt (filing) firm.

d.none of the above.

Feb 13 2020 View more View Less

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