Below Are Various States of Financial Distres S

question 9

Multiple Choice

Below are various states of financial distres s:
1) defaulting on a principal payment on debt
2) restructuring debt
3) liquidating a firm
4) filing for bankruptcy
5) failing to make a required interest payment on time
What is the order of increasing gravity that analysts typically consider when assessing credit risk and bankruptcy risk according to a continuum of financial distress?

• A) 5, 1, 2, 3, 4
• B) 5, 2, 1, 4, 3
• C) 1, 5, 2, 4, 3
• D) 1, 5, 2, 3, 4

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Definitions:

Negative Reinforcement

A behavioral principle where the removal of an unpleasant stimulus following a desired behavior increases the likelihood of that behavior being repeated.

Escape

The act of getting away from a place or situation, often used in the context of avoiding or coping with negative circumstances or feelings.

Unpleasant

Causing discomfort, unhappiness, or revulsion; not enjoyable or pleasant.

Operant Conditioning

A learning process through which the strength of a behavior is modified by reinforcement or punishment.