Beruflich Dokumente
Kultur Dokumente
CHAPTER 24
Bankruptcy, Reorganization,
and Liquidation
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Financial factors
too much debt
insufficient capital
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Voluntary bankruptcy: A
bankruptcy petition filed in
federal court by the distressed
firms management.
Involuntary bankruptcy: A
bankruptcy petition filed in
federal court by the distressed
firms creditors.
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Reorganization in Bankruptcy
Avoids holdout problems.
Due to automatic stay provision,
avoids common pool problem.
Interest and principal payments
may be delayed without penalty
until reorganization plan is
approved.
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$10.0
5.0
0.3
0.5
0.2
3.0
0.5
4.0
$23.5
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$14.0
2.5
$16.5
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Priority Distribution
(millions of $)
Creditor
Accrued wages
Federal taxes
Other taxes
First mortgage
Second mortgage
$0.3
0.5
0.2
2.5
0.0
$3.5
$0.0
0.0
0.0
0.5
0.5
$1.0
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Remaining
GC Claim
$10.0
5.0
0.0
0.0
0.0
0.5
0.5
4.0
$20.0
Initial
Distrib.a
$6.500
3.250
0.325
0.325
2.600
$13.000
Final
Percent
Amountb Received
$6.500
65.0%
5.000
100.0
0.300
100.0
0.500
100.0
0.200
100.0
2.825
94.2
0.325
65.0
0.850
21.2
$16.500
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Chapter 24 Extension
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MDA Illustration
Assume you have the following
2003 data for 12 companies:
Current ratio
Debt ratio
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Current Ratio
Solvent
Firms
.
.
.
.
.
.
.
= Solvent
X = Bankrupt
Discriminant
Boundary
X
X
X
Bankrupt
Firms
Debt Ratio
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