Question

If you were a bondholder (lender) of THC Resorts Co. The company has experienced financial distress i.e., their debt exceeds the value of assets and is about to file for bankruptcy. If your company has cash available, which of the following actions would you take? Check all that apply

Use existing cash to expand hotels and resorts.

Use existing cash to pay off debt.

Use existing cash to pay a special dividend to shareholders.

Use existing cash to pay employees’ bonuses.

You work for a publicly traded corporation. How do you prefer to be rewarded if you achieve the company’s goal? Check all that apply

Paid cash bonus

Paid stock bonus

Paid higher salary

Get promoted

Use the following information for the next three questions.

Below are the annual earnings per share of two similar companies. Note that Company X's earnings per share are higher than Company Y's.

Year	1	2	3	4
Company X	2.7	2.3	2.2	2.1
Company Y	1.7	1.8	1.9	2.0

Which company is likely to have higher share prices at "Year 4"?

Answer 1

A bankruptcy company should pay their money to the secured debts first.

In this case the company have to pay many to secured debtors and unsecured debtors and then o

thers shareholders.

So the company should choose to pay off the debt.

In 2nd case company Y have more earning per share then the X compared to

Last three years.