In a case of bankruptcy, would you rather be the holder of senior debt or subordinated debt? Why?

1. In a case of bankruptcy, would you rather be the holder of senior debt or subordinated debt? Why?

2. A ratio of current assets/current liabilities of less than one should NOT concern an analyst. True or false and why?

Solutions

Expert Solution

1. I will be SENIOR DEBT HOLDER because they will be having a preferential payment then the subordinated debtholder.

hence there will be a higher chance of repayment of my debt in case of bankruptcy of my company when I will be a senior debt holder.

2. Ratio of current asset of less than 1, is always concerning because the company is not having adequate current assets in respect to the current liability. The current ratio is always preferred higher than 1 and more, so the given statement is FALSE.

jeff jeffy answered 2 years ago

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