Question

Greenwood Motels has filed a petition for bankruptcy but hopes to continue its operations both during and after the bankruptcy process. Which one of the following terms best applies to this situation?
A. BankruptcyB. LiquidationC. Technical insolvencyD. Accounting insolvencyE. Reorganization

Answer 1

Answer:

The correct answer is letter "E": Reorganization.

Explanation:

A company reorganization takes place in front of the need for changing operating activities that are not bringing any profit to the organization or whose profit is minimal that it would be convenient to stop those processes. In some cases, reorganizations take place even when the firm has filed for bankruptcy.  

Under those circumstances, the objective of the entity is to be forgiven for not meeting its payment obligations for a certain period while restructuring its operations to keep the business up and running.