Peter's Tools Recently Defaulted on a Bank Loan

question 10

Multiple Choice

Peter's Tools recently defaulted on a bank loan.To avoid a bankruptcy proceeding, the bank agreed to a composition.This composition would do which one of the following?

• A)Forgive the loan payment in its entirety
• B)Extend the due date on the missed loan payment
• C)Reduce the amount of the loan payments so Peter's can pay on time
• D)Transfer some of Peter's assets to the bank in lieu of the loan payment
• E)Transfer all the equity shares in Peter's to the lending bank

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Definitions:

Statement Of Financial Position

The statement of financial position, commonly known as the balance sheet, reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Current Liabilities

Obligations or debts that a company needs to settle within one fiscal year or its operating cycle, whichever is longer.

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts, or financial statements, is represented as a proportion of the total account.

Net Income

The amount by which revenues exceed expenses.