ACCA Strategic Professional · Advanced Financial Management · Financial reconstruction
Dorun Co has net realisable asset values of $9m on liquidation. Liabilities are: secured loan $4m and unsecured creditors $10m. Ignoring liquidation costs, what would unsecured creditors receive per $1 owed on liquidation?
Unsecured creditors would receive $0.50 per $1 owed. After the secured lender takes $4m from the $9m of realisable assets, $5m remains to cover $10m of unsecured claims.
- A$0.40
- B$0.50Correct
- C$0.90
- D$0.45
Explanation
The secured loan is paid $4m first, leaving $9m - $4m = $5m for unsecured creditors. $5m / $10m = $0.50 per $1. $0.40 wrongly deducts the loan twice or ignores the surplus, and $0.90 ignores the secured claim.
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