Shareholders Generally Prefer That a Distressed fiRm

question 233

Multiple Choice

Shareholders generally prefer that a distressed firm:

• A) Undergo reorganization under the Bankruptcy and Insolvency Act because the common stock generally recoups its value.
• B) Undergo liquidation under the Bankruptcy and Insolvency Act because they have first priority over the firm's assets.
• C) Undergo reconstitution under the Bankruptcy and Insolvency Act because that option usually minimizes shareholder loss.
• D) Not declare bankruptcy because they are generally required to convert their shares into debt securities.
• E) Not declare bankruptcy since the common shares are often rendered worthless.

---

Definitions:

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a specific period, indicating efficiency in sales and inventory management.

Compute

To calculate or process using a computer or mathematical operations.

Just-In-Time Manufacturing

A production strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs, producing goods only as needed.

Days' Sales

A financial metric that calculates the average time it takes for a company to turn its accounts receivable into cash.