A Company Is Insolvent When

question 12

Multiple Choice

A company is insolvent when:

• A) It is unable to pay debts as the obligations come due.
• B) It is more likely than not that it will not be able to pay debts within a reasonable period of time following the date such obligations become due.
• C) It is unable to timely remit payment on more than two-thirds of its outstanding obligations measured on a rolling three-month basis.
• D) It is unable to pay debts within 90 days following the close of the company's reporting year, whether such year is a calendar or fiscal year.
• E) It is in default on one-third or more of its outstanding debt obligations.

---

Definitions:

Peak Efficiency

The state of operating at the maximum possible efficiency, where resources are used most effectively and wastage is minimized.

Profits

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Total Profit

Total profit is the financial gain a business achieves after subtracting total costs from total revenue.

AVC

Average Variable Cost, which is the cost a company incurs to produce each additional unit of product, excluding fixed costs.