Insolvency Occurs When a Debtor

question 31

Multiple Choice

Insolvency occurs when a debtor:

• A) is unable to pay his/her debts as they become due.
• B) has a larger number of unsecured creditors than secured creditors.
• C) is unemployed for two consecutive years.
• D) is declared bankrupt by a Certified Accountant.

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Definitions:

Net Loss

The amount by which total expenses exceed total revenues in a given period, indicating a financial loss for the business.

Salary Allowance

A predetermined amount of compensation allocated for salaries, possibly including additional benefits or allowances.

Profit Share

The portion of a company's profits allocated to employees or partners as a bonus or incentive.

Capital Balances

Refers to the amount of money that each partner in a partnership has contributed and maintained in the business.