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1 | |
You are a secured creditor in a Chapter 11 bankruptcy. Listed below, in chronological order, are the steps in a bankruptcy proceeding. Which step establishes the time frame in which claims against the firm must be submitted? |
| | A) | The corporation files a bankruptcy petition. |
| | B) | The petition is approved or denied by a federal judge. |
| | C) | Creditors are divided into classes. |
| | D) | The court confirms the bankruptcy plan. |
| | E) | Payments are made to creditors and shareholders. |
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2 | |
The legal proceeding for liquidating or reorganizing a business is called: |
| | A) | a lawsuit. |
| | B) | accounting insolvency. |
| | C) | technical insolvency. |
| | D) | legal bankruptcy. |
| | E) | business failure. |
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3 | |
In a(n) _____ a business is terminated, usually with a loss to creditors. |
| | A) | violation of protective covenants |
| | B) | bankruptcy reorganization |
| | C) | technical insolvency |
| | D) | accounting insolvency |
| | E) | business failure |
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4 | |
When a firm defaults on a legal obligation, |
| | A) | it is called a business failure. |
| | B) | the firm is in legal bankruptcy. |
| | C) | the firm is in technical insolvency. |
| | D) | the firm is in accounting insolvency. |
| | E) | the firm is in violation of protective covenants. |
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5 | |
Which one of the following describes a correct priority of claims in a bankruptcy liquidation? |
| | A) | Wages, government tax claims, consumer claims, preferred stockholders |
| | B) | Government tax claims, bankruptcy expenses, unsecured creditors, preferred stockholders |
| | C) | Bankruptcy expenses, consumer claims, unsecured creditors, government tax claims |
| | D) | Government tax claims, unsecured creditors, preferred stockholders, bankruptcy expenses |
| | E) | Bankruptcy expenses, wages, unsecured creditors, preferred stockholders |
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6 | |
Which one of the following statements is correct concerning a bankruptcy reorganization under Chapter 11 of the Federal Bankruptcy Reform Act of 1978? |
| | A) | Only voluntary petitions can be filed for Chapter 11. |
| | B) | A bankruptcy judge must accept all voluntary petitions for Chapter 11 bankruptcy. |
| | C) | In most cases, a trustee is appointed to manage a firm that is in Chapter 11 bankruptcy. |
| | D) | Everyone in a class must accept the reorganization plan for the plan to be approved. |
| | E) | New shares of stock may be issued as a result of a Chapter 11 bankruptcy. |
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7 | |
Of the following, _____ would most likely lead to a Chapter 7 bankruptcy liquidation. |
| | A) | the need to escape long-term leases on closed stores |
| | B) | a prepackaged bankruptcy filing |
| | C) | technical insolvency |
| | D) | negative operating cash flow for a year |
| | E) | financial distress |
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8 | |
A firm that has negative net worth is said to be: |
| | A) | a business failure. |
| | B) | in legal bankruptcy. |
| | C) | experiencing technical insolvency. |
| | D) | experiencing accounting insolvency. |
| | E) | in Chapter 11 bankruptcy reorganization. |
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9 | |
Which of the following are correct rankings of priorities in a bankruptcy if the claims are ranked from highest to lowest?I. wages and salaries; consumer claims; unsecured creditors
II. contributions to employee benefit plans; consumer claims; common stockholders
III. government tax claims; preferred stockholders; unsecured creditors
IV. bankruptcy-related administrative expenses; wages and salaries; common stockholders |
| | A) | I and II only |
| | B) | III and IV only |
| | C) | I, II, and IV only |
| | D) | II, III, and IV only |
| | E) | I, II, III, and IV |
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10 | |
Bankruptcy petitions: |
| | A) | can be filed by a firm's creditors. |
| | B) | must include a prepack if Chapter 11 reorganization is requested. |
| | C) | must be approved by a judge when a firm is seeking a Chapter 11 reorganization. |
| | D) | are referred to as involuntary petitions when filed by the firm itself. |
| | E) | for a Chapter 11 reorganization are designed to eliminate all current debt obligations. |
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