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2 April, 11:17

When is a firm insolvent from an accounting perspective? A. When the firm is unable to meet its financial obligations in a timely mannerB. When the firm's debt exceeds the value of the firm's equityC. When the firm has a negative net worthD. When the firm's revenues cease

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  1. 2 April, 11:25
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    Answer: Option C

    Explanation: In simple words, when the liabilities of a company exceeds its assets then such a situation is called accounting insolvency.

    As we all know, as per the accounting equation the assets of a company equals the sum of its liabilities and equity. Therefore, when the liabilities of a company exceeds its assets, its equity or we can say net worth becomes negative.

    From the above we can conclude that the correct option is C.
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Home » Business » When is a firm insolvent from an accounting perspective? A. When the firm is unable to meet its financial obligations in a timely mannerB. When the firm's debt exceeds the value of the firm's equityC. When the firm has a negative net worthD.
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