The Smell Fresh Kitty Litter Company has assets with a market value of ​$11 ​million, liabilities of ​$5 ​million, and 2.3 million shares outstanding. Assuming creditors are paid in full prior to stockholders receiving any​ money, what is the maximum amount the stockholders would receive in a bankruptcy​ settlement? What is the amount per share they would​ receive?
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Part 1
The maximum amount the stockholders would receive in a bankruptcy settlement is ​$

enter your response here million. ​ (Round to the whole​ number.)

To determine the maximum amount the stockholders would receive in a bankruptcy settlement, let’s go through the details step-by-step:

1. **Total Market Value of Assets:** $11 million
2. **Liabilities:** $5 million

In a bankruptcy scenario, creditors (liabilities) are paid in full first. So:

\[
\text{Amount available for stockholders} = \text{Total Assets} - \text{Liabilities}
\]
\[
= 11 \text{ million} - 5 \text{ million} = 6 \text{ million}
\]

Thus, the maximum amount the stockholders would receive is **$6 million**.

Now, to calculate the amount per share:

3. **Number of Shares Outstanding:** 2.3 million

\[
\text{Amount per share} = \frac{\text{Amount available for stockholders}}{\text{Number of shares}}
\]
\[
= \frac{6 \text{ million}}{2.3 \text{ million}} \approx 2.61 \text{ dollars per share}
\]

### Final Answers:
- **Maximum amount for stockholders in bankruptcy settlement:** $6 million
- **Amount per share:** $2.61

Would you like further details or have any questions?

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Here are five related questions for further understanding:

1. What would happen to the amount per share if the liabilities increased?
2. How would the settlement change if the assets were valued at $15 million instead?
3. What factors might impact the market value of the company’s assets in bankruptcy?
4. How does the order of payment in bankruptcy settlements impact shareholders in general?
5. What would be the amount per share if there were 3 million shares outstanding instead?

**Tip:** In finance, always ensure that liabilities are subtracted from assets before calculating shareholder equity, as creditors have priority in bankruptcy.

The Smell Fresh Kitty Litter Company has assets with a market value of ​$11 ​million, liabilities of ​$5 ​million, and 2.3 million shares outstanding. Assuming creditors are paid in full prior to stockholders receiving any​ money, what is the maximum amount the stockholders would receive in a bankruptcy​ settlement? What is the amount per share they would​ receive?

Learn how to calculate the maximum amount stockholders would receive in a bankruptcy settlement. In this example, the Smell Fresh Kitty Litter Company has $11 million in assets, $5 million in liabilities, and 2.3 million shares outstanding. Understand how creditors' priority affects stockholder payments.

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