Chapter 16: Financial Leverage and Capital Structure Part 2

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

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.

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.

Chapter 16: Financial Leverage and Capital Structure Part 2

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