A reorganization plan ________.
A) seeks to build a high debt-equity ratio
B) generally exchanges equity for debt
C) must increase the fixed charges for a firm
D) must maintain the priorities of the contractual claims of all parties

Question

Quizplus · Accepted Answer

A reorganization plan must maintain the priorities of the contractual claims of all parties involved, which include creditors, bondholders, preferred stockholders, and common stockholders. The plan may involve exchanging debt for equity or vice versa, but the main aim is to satisfy the claims of all parties and maintain a viable business structure. A high debt-equity ratio is not necessarily a desirable outcome, and increasing fixed charges could lead to financial distress.

A Reorganization Plan ________