Which of the Following Statements Is FALSE

question 8

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 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:

Treasury Stock

Shares of a company's own stock that it has repurchased from investors but not yet retired.

Consideration Transferred

The payment made by an acquirer to obtain control of an acquiree, which could include cash, assets, or other types of financial agreements.

Patent

A legal right granted by a government authority to an inventor or their assignee, giving them exclusive rights to produce, use, or sell an invention for a certain period of time.

Consideration Paid

The total amount of money or its equivalent paid or delivered by one party to another in exchange for goods, services, or assets.