1. Which of the following are drivers of economic failure?
a. Revenues less than costs
b. Return on investment below costs of capital
c. Profitability below expected levels
d. All of the above
2. Andrade and Kap
...
1. Which of the following are drivers of economic failure?
a. Revenues less than costs
b. Return on investment below costs of capital
c. Profitability below expected levels
d. All of the above
2. Andrade and Kaplan found that the causes of financial distress can be traced to:
a. Managerial hubris
b. Financial leverage
c. Nonstrategic deals
d. Diversification
e. Both c and d
3. Dun & Bradstreet showed that which of the following are causes of business failure?
a. Economic factors (e.g., industry weakness, insufficient profits)
b. Financial factors (e.g., heavy operating expenses, insufficient capital)
c. Neglect (e.g., poor work habits, business conflicts)
d. Fraud
e. All of the above
4. George and Hwang found that firms with high distress costs had:
a. Lower leverage
b. Lower probabilities of default
c. None of the above
d. Both a and b
5. Which of the following is the largest bankruptcy in history?
a. Continental Airlines
b. Worldcom
c. Lehman Brothers
d. None of the above
6. Which of the following bankruptcies were related to fraud?
a. Parmalat
b. Enron
c. Refco
d. All of the above
7. In the United States, the rules governing corporate reorganizations are detailed in which part of the bankruptcy law?
a. Chapter 13
b. Chapter 11
c. Chapter 9
d. None of the above
8. Creditors seeking payments from a company in reorganization bankruptcy in the United States must file:
a. Schedule TO
b. Chapter 11 form
c. Proof of Claim
d. None of the above
9. The initial exclusive period is how many days:
a. 90
b. 30
c. 120
d. None of the above
10. Tashjian, Lease, and McConnell found that pre-voted prepacks:
a. Spend less time in bankruptcy court
b. Devote more time to prefiling negotiations
c. Have lower direct costs as a fraction of assets
d. Have higher recovery rates
e. All of the above
f. Both a and c
11. Denis and Denis show that while poor deal pricing was a factor in the failure of firms in the very early 1990s, the 1990-1991 recession was the primary cause.
True or False
12. The debtor in possession is another name for the bankrupt company. True or False
13. In Chapter 11, when an automatic stay has been granted creditors cannot seize the assets of bankrupt companies without getting court approval.
True or False
14. Laws regulating corporate reorganization in bankruptcy are more liberal from the corporate debtor’s perspective in the United States than in Europe and Canada.
True or False
15. A reorganization plan in Chapter 11 is part of a larger document called a disclosure statement. True or False
16. The Crystal Oil Company was the first major prepackaged bankruptcy. True or False
17. DIP financing refers to financing of leveraged buyouts. True or False
18. Larger companies tend to do better in Chapter 11 bankruptcy than smaller ones. True or False
19. In the United States, a company may only file for Chapter 11 bankruptcy protection one time. True or False
20. A prepackaged bankruptcy may also provide tax benefits because net operating losses are treated differently in a workout than in a bankruptcy
True or False
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