If a firm fails to make the required interest payments on its long-term bonds, it is said to be in:
A) Business failure.
B) Accounting failure.
C) Accounting insolvency.
D) Technical insolvency.

Question

Quizplus · Accepted Answer

Technical insolvency occurs when a firm cannot meet its current obligations, such as interest payments on debt, indicating a lack of liquidity rather than a total loss of solvency or business viability.

If a Firm Fails to Make the Required Interest Payments