Which One of the Following Illustrates an Insolvent Situation

question 62

Multiple Choice

Which one of the following illustrates an insolvent situation?

• A)assets $56,000;annual expenses $60,000
• B)assets $78,000;net worth $22,000
• C)liabilities $45,000;net worth $6,000
• D)assets $40,000;liabilities $45,000
• E)annual cash inflows $45,000;liabilities $50,000

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Definitions:

Stock Split

An action by a corporation in which it splits its current shares into more shares, aiming to increase the trading liquidity of those shares.

Market Price

Market price is the current price at which an asset or service can be bought or sold in an open and competitive market.

Book Value

The net value of a company's assets minus its liabilities, as recorded on its balance sheet.

Dividend Market Equilibrium

A state in the stock market where the supply of stocks a company is willing to sell at a certain dividend yield equals the demand.