In principle,a firm becomes bankrupt when
A)its equity value falls to zero.
B)a lender refuses to lend any additional funds to the firm.
C)its current ratio is less than one.
D)it is one day late paying a payment to a creditor.
E)its debt exceeds its equity.

Question

Quizplus · Accepted Answer

A firm is considered bankrupt when its equity value falls to zero, meaning its liabilities exceed its assets, leaving no residual value for shareholders.

In Principle,a Firm Becomes Bankrupt When