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Bankruptcy

• Business failure that occurs when a firm's liabilities exceed the fair market value of its assets.

• State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from the stockholders to the bondholders.

 
 Embedded terms in definition
 Assets
Business failure
Its
Liabilities
Market value
Market
Unable
 
 Referenced Terms
 Absolute priority: Rule in Bankruptcy proceedings whereby senior creditors are required to be paid in full before junior creditors receive any payment.

 Automatic stay: The restricting of liability holders from collection efforts of collateral seizure, which is automatically imposed when a firm files for Bankruptcy under Chapter 11.

 Bankruptcy cost view: The argument that expected indirect and direct Bankruptcy costs offset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt financing.

 Bankruptcy prediction models: Bankruptcy Prediction Models refer to the quantitative models that estimate the probability of bankruptcy for a given firm or a bank.

 Bankruptcy view: The argument that expected Bankruptcy costs preclude firms from being financed entirely with debt.

 
 Related Terms
 Bankruptcy cost view
Bankruptcy prediction models
Bankruptcy risk
Bankruptcy view
Legal bankruptcy
Prepackaged bankruptcy

<< Banking group Bankruptcy cost view >>

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