Which of the Following Statements Is Most CORRECT

question 7

Multiple Choice

Which of the following statements is most CORRECT?

• A) the primary test of feasibility in a reorganization is whether every claimant agrees with the reorganization plan.
• B) the basic doctrine of fairness states that all debtholders must be treated equally.
• C) since the primary issue in bankruptcy is to determine the sharing of losses between owners and creditors, the "public interest" is not a relevant concern.
• D) while a firm is in bankruptcy, the existing management is always allowed to retain control, though the court will monitor its actions closely.
• E) to a large extent, the decision to dissolve a firm through liquidation versus keeping it alive through reorganization depends on a determination of the value of the firm if it is rehabilitated versus the value of its assets if they are sold off individually.

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Definitions:

Required Return

The smallest anticipated return that an investor looks to obtain by putting money into a certain asset, factoring in the risk entailed.

Annual Dividend

An annual dividend is the total amount of dividend payments a shareholder receives from a company in one financial year.

Constant Dividend

A dividend policy in which a company pays out a fixed amount of dividend per share irrespective of its financial performance.

Rate of Return

The profit or deficit realized on an investment over a certain time, denoted as a percentage of the investment's beginning price.