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?
28.For Case I, what settlement will the unsecured bondholders receive?
29.For Case II, what settlement will the unsecured bondholders receive?
30.For Case II, what settlement will the accounts payable holders receive?
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
c.poor financial actions
33.If a company’s financial position is characterized by current liabilities greater than current assets, it is
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.
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