Banks typically lend to firms that have:
A) positive net worth.
B) negative net worth.
C) zero net worth.
D) unstable net worth.

Question

Quizplus · Accepted Answer

Banks prefer to lend to firms that have positive net worth because it indicates that the firm has assets that can be used as collateral, providing a lower risk of default. Negative or unstable net worth may indicate financial problems and higher risk for the bank. Zero net worth does not provide any assurance for the bank.

Banks Typically Lend to Firms That Have