Most Firms in Financial Distress Do Not Fail or Cease

question 9

Multiple Choice

Most firms in financial distress do not fail or cease to exist. In fact, many firms can actually benefit from financial distress by:

• A) re-evaluating their core operations and restructuring their assets.
• B) selectively ceasing payment on some of their outstanding debts.
• C) filing for bankruptcy.
• D) liquidating.
• E) increasing their debt load.

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Definitions:

Drawee

The party on whom a check, draft, or bill of exchange is drawn and who is ordered to pay the specified amount.

Promissory Note

A written, legally binding agreement in which one party promises to pay a defined sum of money to another party under specific conditions.

Article 3

Often refers to a section of a constitutive document of an organization, treaty, or a part of a legal code detailing specific provisions related to governance, legal processes, or rights.

Certificates of Deposit

Fixed-term financial instruments issued by banks that offer a fixed interest rate in exchange for keeping the deposit untouched for a predetermined period.