When a Company Is in Financial Difficulty and Cannot Fully

question 60

Multiple Choice

When a company is in financial difficulty and cannot fully pay all of its creditors,the first lenders to be paid are the ________.

• A)stockholders
• B)sinking fund holders
• C)junior debtholders
• D)senior debtholders

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Definitions:

Accounts Receivable

Money owed to a company by its debtors for goods or services that have been delivered or used but not yet paid for.

Purchases

Merchandise for resale. It is a cost.

Departmental Gross Profit

The profit made by individual departments within a company, calculated by subtracting the cost of goods sold from the sales revenue generated by each department.

Revenue

Income generated from normal business operations and includes discounts and deductions for returned merchandise.