A Firm Can Become Insolvent with a Small Decrease in Its

question 106

Multiple Choice

A firm can become insolvent with a small decrease in its asset value if it has:

• A) more assets.
• B) a high collateral-to-debt ratio.
• C) a high leverage ratio.
• D) more equity.

---

Definitions:

Increase In Price

A rise in the cost of goods or services, which can be caused by factors such as higher demand, reduced supply, or increased production costs.

Demand For Z

The desire for a specific product or service, labeled 'Z', within a market that consumers are willing and able to purchase at a given price.

Excise Tax

A tax applied to specific goods, services, or activities, often to discourage their use or to raise government revenue.

Price Of Cigarettes

The cost that consumers pay to purchase cigarettes, which can vary widely based on taxes, manufacturing costs, and availability.