BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Detailed explanation-1: -A negative balance in shareholders’ equity, also called stockholders’ equity, means that liabilities exceed assets.
Detailed explanation-2: -If you owe more on your current auto loan than the vehicle is worth-referred to as being “upside down”-then you have negative equity. In other words, if you tried to sell your vehicle, you wouldn’t be able to get what you already owe on it.
Detailed explanation-3: -(1) A company is bankrupt if it has negative equity or is insolvent. a) A company has negative equity if it has more than one creditor and the amount of its liabilities exceeds the amount of its assets (it has negative equity).
Detailed explanation-4: -Shareholder equity can be either negative or positive. If positive, the company has enough assets to cover its liabilities. If negative, the company’s liabilities exceed its assets. If prolonged, this is considered balance sheet insolvency.