Question : 37.If absolute priority rules enforced in a Chapter 7 bankruptcy, : 1325822

 

 

37.If absolute priority rules are enforced in a Chapter 7 bankruptcy, which of the following is least likely to receive payment?

a.local, state, or federal governments owed taxes

b.owners of common stock

c.owners of bonds

d.banks holding loans secured by collateral

 

 

 

38.If absolute priority rules are enforced in a Chapter 7 bankruptcy, which of the following is most likely to receive payment?

a.local, state, and federal governments owed taxes.

b.owners of common stock

c.owners of bonds

d.banks holding loans secured by collateral

 

 

 

39.A firm has outstanding debt of $100 million. Suppose it voluntarily agrees to pay all creditors 40 cents on the dollar. This is

a.an extension.

b.a composition.

c.a combination of the two in (a) and (b).

d.a cram-down.

 

 

 

40.A firm has outstanding debt of $100 million. Suppose it voluntarily agrees to pay a group of creditors 40 cents on the dollar immediately and to pay the remaining creditors 60 cents on the dollar in four periodic installments. This is

a.an extension.

b.a composition.

c.a combination of an extension and a composition.

d.a cram-down.

 

 

 

41.A firm has outstanding debt of $100 million. Suppose it voluntarily agrees to pay all creditors in full in six periodic installments. This is

a.an extension.

b.a composition.

c.a combination of the two in (a) and (b).

d.a cram-down.

 

 

 

42.Suppose a firm has a Z score of 1.6, and the following financial characteristics: working capital to total assets ratio of 0.05, retained earnings to total assets ratio of 0.10, market value of equity to book value of equity ratio of 1.1, and sales to total assets ratio of 0.4. What must be its EBIT to total assets ratio?

a.0.15

b.0.10

c.0.05

d.0.0

 

 

 

43.Gizmo Co. has a Z-score based on its most recent financial information of 2.3. Based on this,

a.Gizmo has a high probability of failure.

b.Gizmo has a low probability of failure.

c.Gizmo’s probability of failure is uncertain.

d.None of these, since the Z-score does not predict firm failure.

 

 

 

44.Gizmo Co. has a Z-score based on its most recent financial information of 1.2. Based on this,

a.Gizmo has a high probability of failure.

b.Gizmo has a low probability of failure.

c.Gizmo’s probability of failure is uncertain.

d.None of these, since the Z-score does not predict firm failure.

 

 

 

45.Gizmo Co. has a Z-score based on its most recent financial information of 3.0. Based on this,

a.Gizmo has a high probability of failure.

b.Gizmo has a low probability of failure.

c.Gizmo’s probability of failure is uncertain.

d.None of these, since the Z-score does not predict firm failure.

 

 

 

46.Gizmo Co. has the following financial measures: working capital to total assets ratio of 0.05, retained earnings to total assets ratio of 0.10, EBIT to total assets ratio of 0.3, market value of equity to book value of equity ratio of 1.1, and sales to total assets ratio of 0.4. What is Gizmo’s Z-score?

a.2.40

b.2.35

c.2.30

d.2.25