Bankruptcy of a Firm Means That It

question 252

Multiple Choice

Bankruptcy of a firm means that it

• A)earned less revenues than its total costs.
• B)cannot meet its contractual obligations to its stockholders.
• C)has a lot of debt owed to its bondholders.
• D)is unable to make timely promised payments on its debt.

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Definitions:

Common Stock

Shares representing ownership in a corporation, giving holders the right to vote at shareholder meetings and to receive dividends, typically with no predetermined dividend amount.

Accrual Accounting

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash transactions happen.

Equity Method

An accounting technique used to assess the earnings attributed to a company's investment in another company, reflecting its share of the investee's profits or losses.

Fair Value Method

An accounting approach where assets and liabilities are assessed and reported at their current market values, rather than their historical cost, reflecting their true economic worth.