Which of the Following Statements Is True

question 53

Multiple Choice

Which of the following statements is true?

• A)Creditors can force a firm into bankruptcy if a firm is found in violation of any of its covenants.
• B)Creditor expropriation is more common in Germany than in the U.S.
• C)Management tries to avoid filing for bankruptcy protection mainly because it is not in the best interest of its shareholders.
• D)Creditors can force a firm into bankruptcy only if a firm misses payments on its debt obligations.

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Definitions:

Investing

The act of allocating resources, often financial, in hopes of generating an income or profit.

Statement of Cash Flows

A financial statement that summarizes the cash inflows and outflows for a company over a period, showing how changes in balance sheet and income affect cash and cash equivalents.

Financing Activity

Activities that result in changes in the size and composition of the equity and borrowings of a company.

Operating Activity

Business actions that are directly related to the production and delivery of goods and services, which are reflected in the income statement.