Your financial situation is insolvent when
A)your expenses exceed your income.
B)your assets are less than your liabilities.
C)your net worth is positive.
D)your debt ratio is too high.

Question

Quizplus · Accepted Answer

Insolvency refers to a situation where your liabilities (debts) exceed your assets. This means that you owe more money than what you own, and therefore, you're unable to pay off your debts. Option A is a common cause of insolvency, but it's not sufficient to confirm insolvency. Option C is the opposite of insolvency, as a positive net worth means that your assets exceed your liabilities. Option D is related to your ability to repay your debts, but it doesn't necessarily confirm insolvency.

Your Financial Situation Is Insolvent When