What Would Be the Priority of the Claims as to the Distribution

question 5

Multiple Choice

What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act? 1 is the highest claim, 5 is the lowest. (1) Trustees' costs to administer and operate the firm.
(2) Common stockholders.
(3) General, or unsecured, creditors.
(4) Secured creditors, who have a claim to the proceeds from the sale of specific property pledged to secure a loan.
(5) Taxes due to federal and state governments.

• A) 1, 4, 3, 5, 2
• B) 5, 4, 1, 3, 2
• C) 4, 1, 5, 3, 2
• D) 5, 1, 4, 2, 3
• E) 1, 5, 4, 3, 2

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Definitions:

Legitimate Power

The authority that a person or a position holds, which is recognized as rightful by those they govern or lead, often derived from official or formal roles.

Expert Power

The influence and authority one possesses as a result of one's experience, skills, or knowledge in a specific area.

Reward Power

The capacity to influence others' behavior by offering them positive incentives.

Coalition Building

The process of assembling a group of diverse organizations or people to pursue a common goal or address a specific issue through collaboration.