Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration


Foundations Of Financial Management
Found in: Page 538
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

Short Answer

The trustee in the bankruptcy settlement for Titanic Boat Co. lists the following book values and liquidation values for the assets of the corporation. Liabilities and stockholders’ claims are also shown.


Book value

Liquidation value

Accounts receivables






Machinery and equipment



Building and plant



Total assets



Liabilities and stockholder’s claims


Accounts payable


First lien, secured by machinery and equipment


Senior unsecured debt


Subordinated debenture


Total liabilities


Stockholder’s claims

Preferred stock


Common stock


Total stockholder’s claims


Total liabilities and stockholder’s claims


f. Compute a ratio of your answers in part d and e. This will indicate the initial allocation ratio.

The allocation ratio is 60%.

See the step by step solution

Step by Step Solution

Step 1: Information provided in question

Total liquidation value of assets left after deducting administrative costs, unpaid taxes, and satisfying first lien = $4,200,000

Total liquidation value of liabilities after partial cover of first lien = $7,000,000

Step 2: Calculation of ratio of asset value and liability value left

The allocation ratio is 60%.

Most popular questions for Business-studies Textbooks


Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.