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Chapter 5: Q3DQ (page 538)

What is the difference between an internal reorganization and an external reorganization under formal bankruptcy procedures?

Short Answer

Expert verified

The internal organization involves evaluation and modification of the organization’s management, whereas, the external reorganization involves the merger of the organization with a stringer firm.

Step by step solution

01

Step 1:Meaning of the internal reorganization

The evaluation process of evaluating current management and replacing it with new management is called internal reorganisation.This process also involves the restructuring of the capital structure of the organisation.

02

Step 2:Meaning of external reorganization

The external reorganisation involves the merger of the organisation with a stronger organisation.The merger of the organisation with a stronger firm ensures better performance in the future.

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Most popular questions from this chapter

The Ellis Corporation has heavy lease commitments. Prior to SFAS No. 13, it merely footnoted lease obligations in the balance sheet, which appeared as follows:

In \( millions

In \) millions

Current assets

\(70

Current liabilities

\)30

Fixed assets

\(70

Long-term liabilities

\)30

Total liabilities

\(60

Stockholder’s equity

\)80

Total assets

\(140

Total stockholder’s equity and liabilities

\)140

The footnotes stated that the company had $14 million in annual capital lease obligations for the next 20 years.

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