Why Would Creditors Be Willing to Give a Portion of What

question 61

Multiple Choice

Why would creditors be willing to give a portion of what they are owed by the debtor firm for equity in the reorganized firm?

• A) They are legally obligated to do so under U.S. bankruptcy law.
• B) Ownership in a firm is inherently more valuable than being a creditor.
• C) The value of the stock may in the long run far exceed the amount of debt the creditors were willing to forgive.
• D) Creditors understand that they can sue the firm at a later date for what they are owed.
• E) None of the above.

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Definitions:

Employers

Individuals or organizations that hire and provide work to employees in exchange for their services.

Craft Unions

Labor unions that represent workers skilled in a particular craft or trade, focusing on specific skill sets and occupations.

Flush Toilet

A flush toilet is a sanitation fixture used for the disposal of human waste, operating by using water to flush the waste through a drain to a sewage system.