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7 Cards in this Set
- Front
- Back
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Insolvent
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when debt exceeds assets
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Illiquid
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Shen cash flows are insufficient to meet maturing obligations
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Early signals of financial distress
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Late payments
pLant closings negative earnings employee layoffs falling stock prices dividend reductions |
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Responses to insolvency
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Combining with another firm
selling assets reducing costs issuing new debt or equity negotiating with creditors to restructure obligations |
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Chapter 7 Liquidation
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1. Petition is filed with bankruptcy court.
2. court issues order for relief, no collection activities. |
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Chapter 11 reorganization
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allows a distressed business enterprise to restructure finances to continue business
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How does a chapter 11 become effective?
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when the plan is accepted by a certain percentage..usually 2/3rds of persons whose rights as creditors or owners have been impaired.
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