Question 1

Renaldo is a turnaround advisor to Futbol Fanatics Incorporated, an insolvent business. To assist them in their workout plan, Renaldo advises to reduce the size of the business and to focus on only one aspect of the business rather than a wide variety of areas. He suggests selling several storage buildings and firing several of the employees. His workout model would be called

Accepted Answer

Retrenchment strategy involves reducing the size or scope of a company's operations, typically through cost-cutting measures such as selling assets and laying off staff, which is what Renaldo is advising.

Question 2

When a turnaround advisor employs the retrenchment model, he may use all the following methods except

Accepted Answer

Infusing extra money is not a method of retrenchment; retrenchment focuses on reducing costs and liabilities, not adding funds.

Question 3

A workout method that generates revenue with new innovations and modifying the company's image or mission is

Accepted Answer

Repositioning involves changing the identity of a product or company in the mind of the consumer, often through innovations and modifications to the company's image or mission, which can lead to new revenue streams.

Question 4

Marty Hog Hunting Supplies has become insolvent due to low sales and nonexistent profits. They hire a turnaround advisor, Rachel Evans, who suggests that they modify their advertising model which currently includes rainbows, hearts and unicorns and a mission statement that states, "Hunting Hogs is Magical." Rachel suggests they should change to a camo theme and a mission, "Hog Hunting for the Mighty." She also suggests that company image should switch away from the current cartoon image to the outdoors theme. Rachel's workout model is

Accepted Answer

Rachel's suggestion to change the advertising model, mission statement, and company image to better align with the target market's expectations is an example of repositioning. Repositioning involves changing the market's perception of a brand or product to better meet the needs or preferences of a target market.

Question 5

Dewy, Cheatum and Howe Law Firm has a billboard that states, "Hire us so we can make as much money as possible for us!" is insolvent. The hire a turnaround advisor who suggests they change the name of their firm and change the billboard advertisement to read, "We are here to serve your needs as you are our first priority!" Of which workout model is this an example?

Accepted Answer

Changing the name of the firm and altering the billboard advertisement to focus on serving client needs represents a repositioning strategy. This involves changing the public perception and market position of the firm to attract more clients by emphasizing their commitment to client service.

Question 6

The workout method that replaces the top-level management with an interim team while a search for new top-level managers in conducted is called

Accepted Answer

Replacement is the process of substituting or exchanging one thing for another. In the context of management, it refers to the act of replacing top-level management with an interim team while searching for new top-level managers.

Question 7

Westerfield Industries is insolvent. A turnaround advisor removes all of the executive officers and replaces them with her team of consultants to run the business until new executive officers can be hired. This is an example of which workout model?

Accepted Answer

The Replacement model involves replacing the current management team or executive officers with a new team, often to bring fresh perspectives and strategies to the company. In this scenario, the turnaround advisor replaces the executive officers with her team of consultants, fitting the Replacement model.

Question 8

Dunlin Muffin is a paper company that has gone insolvent due to the decrease in print material in lieu of digital material. However, top management refuses to look to any changes in the business plan. Which workout model would a turnaround advisor most likely suggest if he feels the current management is resistant to any changes in strategy to keep the business alive?

Accepted Answer

Replacement is the most likely workout model suggested by a turnaround advisor when the current management is resistant to changes in strategy. This involves changing the management team to ensure new strategies can be implemented to save the business.

Question 9

Which workout model involves significant restructuring of the organizational structure and removing inefficient practices?

Accepted Answer

The answer of Which workout model involves significant restructuring of...

Question 10

Antwiser Butch Beer's organizational structure of top management involved all of the heirs of the original founders of company 100 years ago. Only two of the eight top managerial heirs actually work for the company, while the other six only draw a large substantial salary. Additionally, the company is currently plagued with a money losing division that sells yeast. Bev Inn, a turnaround advisor, suggests that the six unproductive heirs be fired and the two remaining heirs continue on as managers and the company stops yeast production. This is an example of which type of workout models?

Accepted Answer

The answer of Antwiser Butch Beer's organizational structure of top...

Question 11

A major disadvantage to a workout is that

Accepted Answer

An unwilling creditor cannot be forced to accept the plan in a workout, as workouts are voluntary agreements for debt restructuring, unlike court-ordered processes.

Question 12

An alternative to a bankruptcy is a(n) __________ which is a form of a liquidation.

Accepted Answer

An Assignment for the Benefit of Creditors (ABC) is an alternative to bankruptcy, where a business assigns its assets to a trustee who then liquidates these assets to pay off creditors. This process is a form of liquidation outside of the bankruptcy court system.

Question 13

Another name for a creditor in an ABC is a(n)

Accepted Answer

In an Assignment for the Benefit of Creditors (ABC), the "assignee" is the party appointed to take control of the debtor's assets and distribute them to the creditors, hence the correct term for a creditor in this context is "assignee."

Question 14

All of the following are part of the assignment for the benefit of creditor process except

Accepted Answer

The assignment for the benefit of creditors process involves an assignee taking control of a debtor's assets to liquidate them and pay off creditors, but it does not typically involve filing documents for forfeiture. Forfeiture is a different legal process.

Question 15

In an assignment for the benefit of creditors there is a fiduciary duty to work in the best interests of the

Accepted Answer

In an assignment for the benefit of creditors, the assignee (the party taking over the assets) has a fiduciary duty to work in the best interests of the creditor(s) to whom the debtor owes money. This process is designed to ensure that creditors receive as much payment as possible from the debtor's available assets.

Question 16

As a result of an ABC, a bar date of was set on January 1^st. Bob, a creditor filed a claim on January 15^th. What most likely will be the outcome of the of Bob's claim?

Accepted Answer

The claim will most likely be disallowed because it was filed after the bar date, which is the deadline for creditors to submit their claims in a bankruptcy or similar proceeding. Claims filed after this date are typically not considered.

Question 17

In Akin Bay Company v. Von Kahle, the court ruled

Accepted Answer

The court ruled that the assignee cannot stand in any better position than the assignor, meaning the rights or position of the assignee are limited to those held by the assignor at the time of the assignment.

Question 18

Al's Automotive is in the process of going through an ABC. After distributing all the fund to any creditor that has a lien on the asset, $20,000 still remains. What will happen to that amount of money next?

Accepted Answer

The remaining $20,000 will be used to pay the fees and costs associated with administering the transaction, such as legal fees, accounting fees, and the fees of the assignee managing the ABC (Assignment for the Benefit of Creditors) process.

Question 19

During an ABC, it is determined that the funds from the sale of assets is not sufficient to pay all of the liens in full. What will be done in this situation?

Accepted Answer

Creditors possessing a valid lien will receive pro rata payments, meaning the available funds from the sale of assets will be distributed among them proportionally to the size of their claims. This ensures a fair distribution based on the amount owed to each creditor.

Question 20

Which of the following statements is correct about the ABC process for a corporation?

Accepted Answer

The ABC process, or Assignment for the Benefit of Creditors, typically requires approval from both the board of directors and the shareholders of a corporation. This process is a method for insolvent companies to liquidate their assets and pay off creditors, and it necessitates agreement from both governing bodies to proceed.

Quiz 25: Alternatives for Insolvent Borrowers