Question 1. What is defined as a condition in which a company is unable to meet debts as the debts mature? 

1. What is defined as a condition in which a company is unable to meet debts as the debts mature?
A. Deficit
B. Liability
C. Insolvency
D. Credit squeeze

2. Under a composition agreement,
A. creditors agree to accept less than the face amount of their claims.
B. debtors in financial difficulty transfer assets “without recourse.”
C. a creditors’ committee is initiated with a plan of settlement proposed by the debtor.
D. the debtor petitions for relief in a bankruptcy court.

3. In which of the following ways can debt be restructured?
I. Assets can be transferred to the creditor.
II. An equity interest can be granted to the creditor.
III. The terms of the debt can be modified.
A. I and II only
B. I and III only
C. II and III only
D. I, II, and III

4. Under which nonjudicial action do creditors agree to assist the debtor in managing the most efficient payment of creditors’ claims?
A. Debt restructuring arrangement
B. Creditors’ committee management
C. Transfer of assets
D. Composition agreement

5. A transfer of assets by a company in financial difficulty is considered a sale if:
I. the transfer includes a recourse provision allowing the buyer to return the asset.
II. the transferee obtains the right to pledge or exchange the transferred assets.
III. the transferred assets have been isolated from the transferor.
IV. the transferor does not maintain effective control over the transferred assets.
A. I, II, and IV
B. Both I and III
C. Both I and II
D. II, III, and IV

6. Chapter 11 of the Bankruptcy Code provides for:
I. Reorganization.
II. Liquidation.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

7. Chapter 7 of the Bankruptcy Code provides for:
I. Reorganization.
II. Liquidation.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

8. The Bankruptcy Reform Act contains chapters which deal with:
I. Individuals.
II. Corporations.
III. Municipal governments.
A. Only I and II
B. Only II and III
C. Only I and III
D. I, II, and III

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