If Absolute Priority Rules Are Enforced in a Chapter 7

question 18

Multiple Choice

If absolute priority rules are enforced in a Chapter 7 bankruptcy,which of the following is most likely to receive payment?

• A) local, state, and federal governments owed taxes.
• B) owners of common stock
• C) owners of bonds
• D) banks holding loans secured by collateral

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Definitions:

Clearing Times

The period it takes for a transaction to be processed, confirmed, and settled between buyer and seller in the financial markets.

Weighted Average Delay

implies the average time delay in a process or system, adjusted for the importance or frequency of each delay component.

Collection Delay

The time lapse between when a payment is made by a customer and when the funds become available to the recipient company.