The Absolute Priority Rule Determines

question 42

Multiple Choice

The absolute priority rule determines:

• A) when a firm must be declared officially bankrupt.
• B) how a distressed firm is reorganized.
• C) which judge is assigned to a particular bankruptcy case.
• D) how long a reorganized firm is allowed to remain under bankruptcy protection.
• E) which parties receive payment first in a bankruptcy proceeding.

---

Definitions:

Common Stock

Equity security representing ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Dividend

A portion of a company's earnings distributed to its shareholders, typically on a regular basis.

Cumulative Preferred Stock

A type of preferred stock that accumulates unpaid dividends, which must be paid out before any dividends can be issued on common stock.

Common Stock

Common stock refers to shares of ownership in a corporation, granting holders voting rights and a share in the company's profits through dividends.