ethics civics MCQ #1689

A company may become insolvent if it:

ethics civics MCQ #1689

  1. Question 1

    Q1. A company may become insolvent if it:

    • A) makes a loss
    • B) has negative working capital
    • C) cannot meet its budgeted level of profit
    • D) cannot pay creditors in full after the realisation of its assets

    Answer: cannot pay creditors in full after the realisation of its assets

    Explanation: A company becomes insolvent when it cannot pay its creditors in full even after realizing (selling) all its assets, meaning its liabilities exceed its total assets — this is the legal balance-sheet definition of insolvency.