IFA IFA Insolvency & Financial Restructuring

Question 1

Which test for insolvency focuses on whether a company's total liabilities exceed its total assets?

Accepted Answer

Balance sheet test

Answer

Cash flow test

Answer

Liquidity ratio test

Answer

Working capital test

Question 2

Under Chapter 7 of the US Bankruptcy Code, what happens to the debtor's non-exempt assets?

Accepted Answer

Assets are liquidated by a trustee to pay creditors

Answer

Assets are restructured over five years

Answer

Assets are transferred to a creditors' committee for management

Answer

Assets are protected from creditor claims indefinitely

Question 3

What is a 'preference payment' in the context of insolvency law?

Accepted Answer

A payment made to a creditor before insolvency that may be reversed by a trustee

Answer

A payment authorized by the bankruptcy court during proceedings

Answer

A creditor's first claim on secured assets in liquidation

Answer

A dividend paid to shareholders before winding up

Question 4

What is the 'automatic stay' that takes effect immediately when a bankruptcy petition is filed?

Accepted Answer

A temporary freeze on most collection actions and lawsuits against the debtor

Answer

A court order requiring the debtor to cease all business operations

Answer

A mandatory pause in the debtor's financial reporting requirements

Answer

A suspension of the debtor's right to incur new obligations

Question 5

In a Chapter 7 liquidation, which class of creditors is paid FIRST from the estate's assets?

Accepted Answer

Secured creditors, to the extent of their collateral value

Answer

General unsecured creditors

Answer

Equity shareholders

Answer

Priority unsecured creditors such as employee wages

Question 6

What does 'fraudulent conveyance' mean in insolvency proceedings?

Accepted Answer

A transfer of property made to hinder, delay, or defraud creditors

Answer

Concealment of assets from a court-appointed trustee during hearings

Answer

Falsification of financial statements submitted before filing for bankruptcy

Answer

An unauthorized payment made to a director during insolvency

Question 7

Which professional is typically appointed to administer a corporate liquidation under US bankruptcy law?

Accepted Answer

A Chapter 7 bankruptcy trustee

Answer

A court-appointed receiver

Answer

A licensed insolvency practitioner

Answer

A CPA designated by the creditors' committee