Technical insolvency occurs when
A)the firm is unable to meet its current obligations as they come due, even though the value of its assets exceeds its liabilities
B)the recorded value of the firm's assets is less than the recorded value of its liabilities
C)the firm files a bankruptcy petition in accordance with the Federal bankruptcy laws
D)the owners of the businesses lack experience

Question

Quizplus · Accepted Answer

Technical insolvency occurs when a firm is unable to meet its current obligations as they come due, even though the value of its assets exceeds its liabilities. This means that the firm has insufficient cash or other liquid assets on hand to pay off its debts, even though its overall financial position may be strong. It is an indication that the firm may be heading towards bankruptcy if the situation is not remedied. The other options listed do not accurately describe technical insolvency.

Technical Insolvency Occurs When