In principle,when does a firm become bankrupt?
A)When its equity value falls to zero
B)When a lender refuses to lend any additional funds to the firm
C)When its current ratio is less than one
D)When it is one day late paying a payment to a creditor
E)When a bankruptcy petition is filed with the court

Question

Quizplus · Accepted Answer

When a firm's equity value falls to zero, it means that the firm has no more assets to cover its liabilities. This is the point at which the firm is considered bankrupt.

In Principle,when Does a Firm Become Bankrupt