A company is technically insolvent when:
A) it has a negative book value.
B) its total debt exceeds its total equity.
C) it is unable to meet its financial obligations.
D) it files for bankruptcy protection.
E) the market value of its stock is less than its book value.

Question

Quizplus · Accepted Answer

Technical insolvency occurs when a company is unable to meet its financial obligations, such as paying bills or servicing debt. This means that the company may not have enough cash or assets to cover its debts and expenses, even though its assets may still exceed its liabilities. A negative book value, total debt exceeding total equity, filing for bankruptcy protection, or market value of stock being less than book value may be indicators of financial distress or insolvency, but they do not necessarily mean that a company is technically insolvent.

A Company Is Technically Insolvent When