If the liquidation value of a firm is negative,then:
A) the firm's debt exceeds the market value of assets.
B) the firm's debt exceeds the book value of equity.
C) the book value of assets exceeds the firm's debt.
D) the market value of assets exceeds the firm's debt.

Question

Quizplus · Accepted Answer

Liquidation value is the amount of money that can be realized by selling off a firm's assets. If the liquidation value is negative, it means the assets are worth less than the firm's debts. Therefore, the firm's debt exceeds the market value of assets which is option A.

If the Liquidation Value of a Firm Is Negative,then