Which one of the following will generally have the highest priority when assets are distributed in a bankruptcy proceeding?

Corporations in the U.S. tend to:    A.  minimize taxes. B.  underutilize debt. C.  rely less on equity financing than they should. D.  have relatively similar debt-equity ratios across industry lines. E.  rely more heavily on debt than on equity as the major source of financing. Refer to section 16.9

48.

In general, the capital structures used by U.S. firms:    A.  tend to overweigh debt in relation to equity. B.  generally result in debt-equity ratios between 0.45 and 0.60. C.  are fairly standard for all SIC codes. D.  tend to be those which maximize the use of the firm's available tax shelters. E.  vary significantly across industries. Refer to section 16.9

49.	A firm is technically insolvent when:    A.  it has a negative book value. B.  total debt exceeds total equity. C.  it is unable to meet its financial obligations. D.  it files for bankruptcy protection. E.  the market value of its stock is less than its book value. Refer to section 16.10

50.

Which one of the following statements related to Chapter 7 bankruptcy is correct?    A.  A firm in Chapter 7 bankruptcy is reorganizing its operations such that it can return to being a viable concern. B.  Under a Chapter 7 bankruptcy, a trustee will assume control of the firm's assets until those assets can be liquidated. C.  Chapter 7 bankruptcies are always involuntary on the part of the firm. D.  Under a Chapter 7 bankruptcy, the claims of creditors are paid prior to the administrative costs of the bankruptcy. E.  Chapter 7 bankruptcy allows a firm to restructure its equity such that new shares of stock are generally issued prior to the firm coming out of bankruptcy. Refer to section 16.10

51.

Which one of the following will generally have the highest priority when assets are distributed in a bankruptcy proceeding?    A.  consumer claim B.  dividend payment to preferred shareholder C.  company contribution to the employees' retirement account D.  payment to an unsecured creditor E.  payment of employee wages Refer to section 16.10

52.

A firm may file for Chapter 11 bankruptcy: I. in an attempt to gain a competitive advantage. II. using a prepack. III. while allowing the current management to continue running the firm. IV. only after the firm becomes insolvent.    A.  I and III only B.  I and II only C.  I, II, and IV only D.  I, II, and III only E.  I, II, III, and IV Refer to section 16.10

53.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:    A.  permits creditors to file a prepack immediately after a firm files for bankruptcy protection. B.  prevents creditors from submitting any reorganization plans. C.  prevents firms from filing for bankruptcy protection more than once. D.  permits key employee retention plans only if an employee has another job offer. E.  allows firms to pay bonuses to all key employees to entice those employees to remain in the firm's employ. Refer to section 16.10