Which of the Following Properly Represents the Hierarchy of Creditor

question 9

Multiple Choice

Which of the following properly represents the hierarchy of creditor and stockholder claims?

• A) Common stock, senior secured debt, subordinated debentures.
• B) Preferred stock common stock, subordinated debentures.
• C) Debentures preferred stock, common stock.
• D) None of these is a valid hierarchy.

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Definitions:

Dissociating Member

An individual who is leaving or has left a partnership or limited liability company (LLC), and hence is severing ties with the entity.

LLC

A Limited Liability Company is a type of business organization that merges the benefit of pass-through taxation seen in partnerships or sole proprietorships with the advantage of limited liability found in corporations.

Capital Injection

A capital injection is the infusion of funds into a business by its owners or external parties, often to shore up its financial health or expand operations.

Bankruptcy

A legal process for individuals or businesses that are unable to repay their outstanding debts, allowing them to eliminate or repay some or all of their debts under the protection of the bankruptcy court.