Most Firms in Financial Distress Do Not Fail and Cease

question 34

Multiple Choice

Most firms in financial distress do not fail and cease to exist.Many firms can actually benefit from distress by:

• A)forcing a firm to reevaluate their core operations.
• B)realigning their capital structure to reduce interest costs.
• C)entering Chapter 11 and liquidating the firm.
• D)Both A and B.
• E)Both A and C.

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Definitions:

Corporate Social Performance

How a company manages its social responsibilities, impacting stakeholders and contributing to sustainable development.

Virtuous Circle

A chain of positive events that reinforce themselves through a feedback loop, leading to further beneficial outcomes.

Rationalization

The process of offering a logical or reasonable explanation for behaviors or decisions that might otherwise appear irrational.

Government Contract

A legally binding agreement between a business and a government entity for the supply of goods or services.