- 15 Marks
FM – May 2024 – L3 – SC – Q5 – Financial Distress and Bankruptcy
Discuss problems of severe financial difficulties and the impact of high financial gearing on stakeholders, excluding bondholders.
Question
(a) Explain the main problems and costs which might arise for a company experiencing a period of severe financial difficulties. (7 Marks)
(b) Describe how interested parties, other than bondholders, will be affected by high financial gearing levels, and describe what protective measures they can take. (8 Marks)
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