Asked by Summer Reimer on Jun 30, 2024
Verified
Companies generally create liabilities that exceed assets by:
A) borrowing money they cannot repay.
B) issuing additional stock.
C) losing a lawsuit.
D) a and c
Liabilities
Financial obligations or debts that an entity owes to others, which must be settled over time through the transfer of assets or services.
Assets
Resources owned by a business that have economic value and can be converted into cash or provide future benefits.
Borrowing Money
Acquiring funds from a lender under the condition of returning the principal sum along with agreed interest, used by individuals or organizations to finance their needs.
- Separate the characteristics of financial assets from real assets, delve into the properties of bonds, and understand the concept of debt linkages.
Verified Answer
JY
James YetmanJul 01, 2024
Final Answer :
D
Explanation :
Option A represents a situation where companies take on debt that they cannot repay, which increases their liabilities. Option C refers to a situation where companies lose a lawsuit and are required to pay a settlement to the other party, which also increases their liabilities. Therefore, both options A and C contribute to companies creating liabilities that exceed their assets.
Learning Objectives
- Separate the characteristics of financial assets from real assets, delve into the properties of bonds, and understand the concept of debt linkages.