Which of the Following Statements Is False

question 42

Multiple Choice

Which of the following statements is false?

• A) The direct costs of bankruptcy are likely to be higher for firms with more complicated business operations and for firms with larger numbers of creditors, because it may be more difficult to reach agreement among many creditors regarding the final disposition of the firm's assets.
• B) In a prepackaged bankruptcy (or "prepack") a firm will first develop a reorganization plan with the agreement of its main creditors, and then file Chapter 7 to implement the plan and pressure any creditors who attempt to hold out for better terms.
• C) A study of Chapter 7 liquidations of small businesses in the U.S. found that the average direct costs of bankruptcy were 12% of the value of the firm's assets.
• D) Studies typically report that the average direct costs of bankruptcy are approximately 3% to 4% of the pre-bankruptcy market value of total assets.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production process and are a significant component of the finished product.

Budget Performance Reports

Documents that compare actual financial outcomes to the budgeted amounts, providing insight into a company's financial performance and budgetary control.

Planned Objectives

Predefined goals or targets an organization aims to achieve within a specific timeframe through strategic planning.

Actual Performance

Actual performance refers to the tangible, measured outcomes of activities or tasks, as opposed to planned or expected results.