Answer:
Results are below.
Explanation:
Giving the following information:
Production= 22,000 units
Actual: 4,220 hrs. at $44.50
Standard: 4,160 hrs. at $46.00
To calculate the direct labor time and rate variance, we need to use the following formula:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Direct labor time (efficiency) variance= (4,160 - 4,220)*46
Direct labor time (efficiency) variance= $2,760 unfavorable
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (46 - 44.5)*4,220
Direct labor rate variance= $6,330 favorable
Total variance= 6,330 - 2,760
Total variance= $3,570 favorable
There are several economic explanations for why trade is so commonplace. Match each of the examples listed below with the economic concept that best explains the behavior or observation.
A. Swiss watch manufacturers producing high quality time pieces.
B. U.S. auto makers offering a great variety of makes and models of cars.
C. The ability of developing nations to export textiles to wealthier countries.
D. Doctors becoming experts in one type of medicine rather than becoming proficient in many areas.
E. Your economics professor paying a gardener to do work that he/she could do on their own.
1. Comparative Advantage
2. Specialization or Economies of Scale
Answer:
Explanation:
A. Swiss watch manufacturers producing high quality time pieces.
1. Comparative Advantage
B. U.S. auto makers offering a great variety of makes and models of cars.
2. Specialization or Economies of Scale
C. The ability of developing nations to export textiles to wealthier countries.
US auto makers manufacture on large scale so they have economies of scale . Moreover they are technically superior because of specialisation .
1. Comparative Advantage
wealthier nation too can export textile but that will be costlier so developing nation has comparative advantage of cheap labour.
D. Doctors becoming experts in one type of medicine rather than becoming proficient in many areas.
2. Specialization or Economies of Scale
E. Your economics professor paying a gardener to do work that he/she could do on their own.
1. Comparative Advantage
Professor can earn more by using his time as a professor so he has comparative advantage .
The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, and the price of a 3-month call option at an exercise price of $100 is $10. a. If the risk-free interest rate is 10% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $100? (The stock pays no dividends.)
Answer:
A.$7.65
B. $17.65
C. $18.07
Explanation:
Calculation for the price of a 3-month put option on P.U.T.T. stock
Using this formula
P = C-S+[X/(1+r)T]
Where,
C represent call option price =$ 10
S represent spot price = $100
X represent exercise price =$100
T represent time period of put option =3 or 1/4months
R represent risk free return =10%
Let plug in the formula
P = C-S+[X/(1+r)T]
P = 10-100+[100/(1+0.10)1/4]
P = 10-100+[100/(1.10)1/4]
P = 10-100+[100/1.0241]
P = 10-100+97.65
P = 10-2.35
P = $7.65
Therefore the price of a 3 month put option stock will be $7.65
B. Calculation for What would be a simple options strategy .
The simple options strategy will be the straddle which will inturn enable the investor to buy one put option as well as one call option
Now let calculate for the The Total cost of straddle option
The Total cost of straddle option is = $10+$ 7.65
The Total cost of straddle option= $ 17.65.
The amount of amount of Total cost of straddle option will be $ 17.65.
C.Calculation for How far would it have to move in either direction inorder to make a profit ontl the initial investment
Inital investment Profit= $ 17.65×(1.10)^1/4
Initial investment Profit=$ 17.65×1.0241
Initial investment Profit= $ 18.07
If current market interest rates rise, what will happen to the value of outstanding bonds?
1. They will rise.
2. They will remain unchanged.
3. There is no connection between current market interest rates and the value of outstanding bonds.
4. They will fall.
Answer:
The correct answer is 4. If current market interest rates rise, the value of outstanding bonds will fall.
Explanation:
The economics of financial investment of bonds indicates that if the value of the interest rate rises, said rise implies a virtual increase in the risk of the bond, that is, it pays more interest because it is more risky to invest in it.
Therefore, in the event of an interest increase, the price of the bonds will fall. On the contrary, a lower interest rate infers a greater security of the financial asset, with which the lower the interest rate, the higher the value of the bond.
On December 31, the fair value of Blossom is estimated to be $820,800. The carrying value of Blossom’s net identifiable assets, including the goodwill, at year-end is $855,000. Prepare Cullumber’s journal entry, if necessary, to record impairment of goodwill.
Answer:
Dr goodwill impairment $34200
Cr goodwill $34200
Explanation:
The fact that the fair value of Blossom’s net identifiable assets is less than the carrying value is a strong indication that the goodwill has been impaired and the impairment is computed thus:
Goodwill impairment=Fair value of net assets-carrying value
fair value of net assets=$820,800
Carrying value of net assets=$855,000
goodwill impairment=$855,000-$820,800=$34200
The double entries would be a debit to goodwill impairment loss account in the statement of profit or loss and a credit to goodwill.
As part of their sales training, the staff at Penny Stores is encouraged to build personal relationships with the store's patrons. Apart from receiving product training, the staff is taught to follow a scripted sales process wherein they must greet the customers, introduce themselves, and enquire about their purchase. They are also encouraged to engage in casual conversation with the customer. In a recent survey conducted by the marketing department, it was revealed that customers were dissatisfied with the level of service at Penny Stores. Which of the following, if true, best explains this situation?
A) Customers come to Penny Stores to make high-involvement purchases.
B) The training period for the staff is three weeks long.
C) Penny Stores offers an extensive range of consumer products.
D) Customers associate superior service with efficiency and not friendliness.
E) The staff at Penny Stores is friendly but not familiar.
Answer:
D) Customers associate superior service with efficiency and not friendliness.
Explanation:
In the given scenario of Penny Stores sales people are encouraged to build a relationship with the customer by following a scripted sales process.
They must greet the customer, introduce themselves and inquired about their purchase.
Staff are also encouraged to engage in casual conversation with customers.
The aim of this strategy is to create an atmosphere of friendliness.
However a survey conducted shows customers are dissatisfied.
It shows that customers do not appreciate the effort of staff at being friendly, but rather they prefer efficient service delivery.
If a business is greedy for profits, it is logically consistent for that business to also racially discriminate based on personal preference it might have. TRUE OR FALSE?
The statement is true that If a business is greedy for profits, it is logically consistent for that business to also racially discriminate based on personal preference it might have.
The business operates in the market with its primary goal to get profits from its sales. It makes them differentiate their customers depending on their status, race, gender, ethnics, and others in order to get the highest price from their sales.
Therefore, this discrimination is initiated with the help of a price discrimination policy, which means a business may charge a higher price from people from different racial groups.
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What are the two methods used to translate financial statements and how does the functional currency play a role in determining which method is used? Provide academic support in your response.
Answer:
The two methods of translating financial statements are the current rate method/closing rate method and the temporal method
Explanation:
Functional currency simply means the main currency used by a business. it could also be defined as the primary currency used in the economic environment in which a business operates as in where it generates most of its cash and also spends it
Functional currency determines to a large extent the method used in translation of financial statements. When there is no difference between local currency and foreign currency, current rate method is used and vice versa for temporal rate method
please find attached from Advanced Accounting
Hoyle, J., Schaefer, T., & Doupnik, T. (2015)
When computing yield to maturity, the implicit reinvestment assumption is that the interest payments are reinvested at the:
Answer:
The remaining part of the question is:
The interest payments are reinvested at the:
a.Coupon rate.
b.Current yield.
c.Yield to maturity at the time of the investment.
d.Prevailing yield to maturity at the time interest payments are received.
e.The average yield to maturity throughout the investment period
Correct Answer:
b.Current yield.
Explanation:
Iron Works International is considering a project that will produce annual cash flows of $38,500, $47,200, $57,900, and $23,400 over the next four years, respectively. What is the internal rate of return if the project has an initial cost of $112,500
Answer:
18.625%
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-112,500
Cash flow in year 1 = $38,500
Cash flow in year 2 = $47,200,
Cash flow in year 3 = $57,900,
Cash flow in year 4 = $23,400
IRR = 18.625%
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
Suppose that the central bank in this economy is concerned that inflation is too high and wants to lower the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as_____. To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of_______%.
If people have rational expectations, the economy may not have to endure an unemployment rate as high as predicted by the short-run Phillips curve.
A. True
B. False
Answer:
i) Dis-inflation
ii) 9%
iii) True
Explanation:
A reduction in the rate of inflation is known as Dis-inflation and for the central bank to reduce inflation from 8% to 2% the central bank would have to accept a 9% unemployment rate
This can be proved below using this relationship
reduction of inflation = new inflation ( Δ u )
where Δ u = change in unemployment
hence increase in unemployment will be
Reduction of inflation / new inflation
= 6% points / 2% = 3%
From the intersection of the short-run Philips curve and the long run Philips curve when the inflation rate is at 8% the unemployment rat is at 6% and when the inflation rate falls to 2% the unemployment rate rises to 9% ( 6% + 3% ) the calculation above supports the effect of the reduction in inflation rate on unemployment rate
Due to Rational expectations from the people they will have to endure an unemployment as high as predicted this is in order to ensure a strong purchasing power for the currency ( True )
The correct words to fill the given blanks in the context of the excerpt would be as follows:
1). The term employed to denote the fall in inflation rate is called;
- Disinflation
2). The rate of inflation that the government will have to tolerate to reduce it to 2% would be:
- 9%
3). The claim proposed regarding the people's rational expectations preventing the excess rate of unemployment would be considered:
True
1). 'Disinflation' is described as the terminology that is employed to refer to the process by which the rate of inflation is provisionally downturned.
2). In order to bring a fall in the rate of inflation, the government may have to tolerate a temporary hike of being it at 9% as the association shown below:
As we know,
The fall in reduction = Δu(The new rate of inflation)
with Δu denoting the alteration in the rate of unemployment
∵ Increase in unemployment = Reduction of Inflation ÷ New rate of Inflation
= 6% ÷ 2%
= 3%
In order to reduce the rate to 2%,
The temporary rate of inflation would be 6% + 3% = 9%
3). In the situation of people having reasonable expectations, the inflation rate would be limited as purchasing power would be saved for necessary items as unnecessary wants are the primary cause of reduced purchasing power and unemployment. Thus, it is true.
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Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department:________.
Units:
Beginning Inventory: 30,000 units, 100% complete as to materials and 55% complete as to conversion.
Units started and completed: 120,000.
Units completed and transferred out: 150,000.
Ending Inventory: 32,500 units, 100% complete as to materials and 30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $48,000.
Costs in beginning Work in Process - Conversion: $53,850.
Costs incurred in February - Direct Materials: $328,050.
Costs incurred in February - Conversion: $604,150.
Calculate the cost per equivalent unit of materials.
a. $2.06
b. $2.08
c. $1.78
d. $2.40
e. $2.69
Answer:
the cost per equivalent unit of materials is a. $2.06.
Explanation:
Step 1 : Calculate the total equivalent units of production for raw materials.
Units completed and transferred (150,000 × 100%) = 150,000
Units in Ending Work in process (32,500 × 100%) = 32,500
Total equivalent units of production for raw materials = 182,500
Step 2 : Calculated the total raw material costs incurred during the period.
Raw material cost in Beginning Work in Process = $48,000
Add Raw Materials Cost Incurred during the period = $328,050
Total raw material costs incurred = $376,050
Step 3 : Calculate the cost per equivalent unit of materials.
Cost per equivalent unit = Total raw material costs incurred ÷ Total equivalent units of production for raw materials
= $376,050 ÷ 182,500
= $2.06
Suppose that the dollar cost of producing x radios is c(x) = 800 + 40x - 0.2x2. Find the marginal cost when radios are produced.
Answer:
MC = 40 – 0.4x
Explanation:
Given the cost of producing the radio, C(X) = 800 + 40x – 0.2x^2
Now we have to find the marginal cost from the total cost. Since we know that the marginal cost can be derived from the total cost by taking the differentiation of total cost function with respect to x. therefore, below is the calculation of marginal cost.
C(X) = 800 + 40x – 0.2x^2
MC = d(c)/dx = 40 – 0.4x
MC = 40 – 0.4x
The accountant for Flagger Company prepared the following list of account balances from the company’s records for the year ended December 31:
Fees earned $165,000 Cash $30,000
Accounts receivable 14,000 Selling expenses 44,000
Equipment 42,000 Common stock 36,000
Accounts payable 12,000 Interest income 3,000
Salaries & wages expense 40,000 Rent expense 51,000
Income taxes payable 5,000 Prepaid Rent 2,000
Notes payable 20,000 Income taxes expense18,000
Prepare an income statement for Flagger Company in good form.
Flagger Company
Income Statement
For the Year Ended December 31
Revenues:
Accounts receivable $
Cash $
Expenses:
Rent expense $
Selling expenses
Salary and wages expense
Income taxes expense
Total expenses
Net income or loss $
Answer:
Net operating income $15,000
Explanation:
Flagger Company
Income statement for the year ended , 31 December
Fee earned
165,000
Less : Operating expenses
Salaries and wages 40,000
Rent expense. 51,000
(91,000)
Gross profit.
74,000
Less: Selling expense.
(44,000)
Profit before interest and tax.
30,000
Less interest expense.
(18,000)
12,000
Add: Interest income.
3,000
Net operating income.
15,000
The market value of Firm L's debt is $200,000 and its yield is 9%. The firm's equity has a market value of $300,000, its earnings are growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what would Firm L's total value be if it had no debt?
Answer:
14%
Explanation:
As we know that:
Firm's Cost of Equity = Ke + (Ke - Kd) * Market Value of Debt / Market Value of Equity
Here
Ke is 12%
Kd is 9%
MV of Debt is $200,000
MV of Equity is $300,000
By putting values, we have:
Firm's Cost of Equity = 12% - (12% - 9%) * $200,000 / $300,000
Firm's Cost of Equity = 14%
I have an idea that might address all of these issues. What if none of us have any of these donuts but instead we break up into teams and sell them to our coworkers for a profit
The full question reads;
Which legal school of thought is illustrated in this dialogue?
Alison: (She stands during David's speech as if inspired but sits down once Bob starts talking.)
Bob: Right. Power to the people David. Anyone else hungry? (He tries to slowly move to the donuts and Joyce continues to defend them like a point guard.)
Lee: I have an idea that might address all of these issues. What if none of us have any of these donuts but instead we break up into teams and sell them to our coworkers for a profit? Instead of getting one or two donuts, we can stop on our way home and pick up a dozen of them each with our profits. In this case, we ignore the company stick-in-the-mud book regulations because, as you can see, we are obviously presented with some opportunities for a little economic development. Corporate rules here must bow to economic opportunity. If we let our rules block our prosperity, what kind of company will we become?
OPTIONS:
• Legal realism school of thought.
• Law and economics school of thought.
• Sociological school of thought.
• Command school of thought.
Answer:
Legal realism school of thought.
Explanation:
Notice Lee's statement "we ignore the company stick-in-the-mud book regulations...Corporate rules here must bow to economic opportunity. If we let our rules block our prosperity, what kind of company will we become".
Interestingly, the legal realism school of thought looks at how laws (or as in this case corporate rules) should be understood and applied. So, in a sense, Lee has his own perception of the importance of the organization's rules.
Resnick Inc. is considering a project that has the following cash flow data. What is the project's payback?Year 0 1 2 3Cash flows -$325 $200 $200 $2001. 1.93 years2. 1.63 years3. 1.80 years4. 1.67 years5. 1.50 years
Answer:
1.63 years
Explanation:
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Payback period = Amount invested / cash flow
= $325 / 200 = 1.625 years
Answer: 2. 1.63 years
Explanation;
Payback period is one way of checking to viability of a project by checking how long it will take for the project to pay back it's initial investment.
Payback Period = Year before Payback + (Amount remaining till payback/ Cash inflow in Year of Payback)
Cash inflow is $200 each so 2 years will bring in $400 which is more than the investment.
Year before payback is therefore 1 year.
Amount remaining till payback = 325 - 200 = 125
Cash inflow in Year of Payback being the second year is $200.
Payback Period = 1 + ( 125/200)
= 1 + 0.625
= 1.625
= 1.63 years
The idea behind the Kanban system is to authorize materials for production only if there is a need for them.a) trueb) false
Answer: True
Explanation:
Kanban is a Lean tool that is designed in order to reduce idle time that occurs during production. The Kanban system was put in place to remove wastages so that what the process needs will be delivered exactly when they are needed.
The idea behind the Kanban system is to authorize materials for production only if there is a need for them.
There is no nation involved in global trade that still maintains a fixed value of their currency relative to a key currency or gold
a. true
b. false
Answer:
a. true
Explanation:
Gold is a currency that is the free market system that will fluctuate tp the form of exchange and no country in international trade can maintain a fixed value of its currency relative to the key currency though they can trade gold in multiple ways and can participate in price movements.f one asset class greatly underperforms another class in an asset allocation plan, the portfolio must be:
Answer:
rebalanced.
Explanation:
When this occurs the portfolio must be rebalanced. This refers to the process of realigning and weighting a portfolio's assets in order to maintain an original or desired level of asset allocation. This is accomplished by buying and selling different assets so that you take profits and at the same time allocate percentages from one asset to another. This also allows you to maintain a level of acceptable risk in your portfolio.
77. Identify a potential risk for businesses using E-Commerce. a. increased customer satisfaction b. the possibility of fraudulent transactions c. inconvenience of returns d. none of the above
Answer:
B. The possibility of fraudulent transactions.
Explanation:
In recent times, it is well known and well known that marketplaces have also included the buying and selling in different other levels which E-commerce has thrived in many ways and are tested to be worth a while. In as much as it is good, e-commerce business in recent times has given a lot of exposure and access to a larger audience. And this has been learnt to have not certainly been possible to achieve through conventional retailing methods. In as much as it is loved by a reasonable amount of people, it is seen to have also made business owners and customers prone to serious security threats; which may include forms like online security breach, client disputes and refunds
Violation of Intellectual property, credit cards scams, poor customer service only to mention but few which are risky too.
Breaches of this form are seen to the risks that can affect your business and you can bear the loss if they are not addressed properly.
Gardiner, Inc. reported a retained earnings balance of $190,000 at December 31, 2024. In June 2025, Gardiner discovered that merchandise costing $20,000 had not been included as ending inventory in its 2024 financial statements. Also, a $50,000 accrued revenue was omitted on 12/31/24. Gardiner has a 20% tax rate. Assuming the correcting journal entry net of tax was recorded, what amount should Gardiner report as adjusted beginning retained earnings in its statement of retained earnings for year ended December 31, 2025?
Answer: $246,000
Explanation:
Merchandise costing $20,000 had been omitted from the Ending Inventory.
Ending inventory is deducted from Cost of Goods sold which means that the Cost of Goods sold was overstated by $20,000.
Cost of Goods sold are subtracted from sales to find Gross Income so if it was overstated then Income was understated by $20,000.
Accrued Revenue is to be added to Income so if it was omitted then income was understated by $50,000.
Income in total was therefore understated by = 20,000 + 50,000
= $70,000
The correcting entry is net of tax so;
= 70,000 * ( 1 - 20%)
= $56,000
Retained earnings will therefore be;
= 190,000 + 56,000
= $246,000
The Work section in QuickBooks Online Accountant is a great starting point for planning your new client engagement. What are the first step(s) in the client onboarding workflow?
Answer:
Meet the client and gather information
Explanation:
The first step in the client onboarding workflow is to meet the client and gather information about him or her. This is done by using new client engagement check lists to ask all the required questions in other to gather all necessary information about the client. This is to ensure that the client set objectives and expectations are properly planned for in the onboarding process.
If there were 50000 pounds of raw materials on hand on January 1, 140000 pounds are desired for inventory at January 31, and 530000 pounds are required for January production, how many pounds of raw materials should be purchased in January?
Answer:
620,000 pounds
Explanation:
The computation of the number of pounds required raw material purchased in Jan is shown below:
Pounds of raw materials purchased is
= Pounds of material required for production + Desired Ending Inventory - Beginning Inventory
= 530,000 pounds + 140,000 pounds - 50,000 pounds
= 620,000 pounds
Hence, the number of pounds to be purchased is 620,000 pounds
If the Open Market Purchase is $1 billion by approximately how much will the supply of Money increase
Answer: $10 billion
Explanation:
Increase in the money supply can be calculated by multiplying the injection of cash into the economy by the Money Multiplier which is calculated as;
= 1/ reserve ratio
Reserve ratio = 10%
Money Multiplier = 1 / 10%
= 10
The money supply will therefore increase by;
= 1,000,000,000 * 10
= $10,000,000,000
= $10 billion
The stock of Big Joe's has a beta of 1.40 and an expected return of 12.10 percent. The risk-free rate of return is 4.6 percent. What is the expected return on the market?
Answer:
5.403%
Explanation:
Calculation for the expected return on the market
Using this formula
Expected return =(Expected return-Risk-free rate of return)/Stock beta +Risk-free rate of return
Where,
Expected return=12.10%
Risk-free rate of return=4.6%
Stock beta =1.40%
Let plug in the formula
Expected return =(0.121-0.046)/0.014+0.046
Expected return =0.075/0.014+0.046
Expected return=5.357+0.046
Expected return =5.403%
Therefore the expected return on the market will be =5.403
Tom bought 5 bonds with $1,000 face value for $1,100 5 years ago. The coupon rate is 8%. Tom sold the bond for $900 today. What is Tom’s total percentage return?
Answer:
18.18%
Explanation:
Income = Coupon amount over the period of holding
Income =($1000*8%)*5
Income =$400
Capital gain/(loss)=Sale price - Purchase price
Capital gain/(loss)=$900 - $1100
Capital gain/(loss)=-$200
Total percentage return=[(Income+Capital gain)/Purchase Price]*100
=[$400+(-$200)]/$1100]*100
=[$200/$1100]*100
=18.18%
Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stock with a beta of 1.0, and (3) a stock with a beta of 1.7? Ehrhardt, Michael C.. Corporate Finance: A Focused Approach (p. 286). Cengage Learning. Kindle Edition.
Answer:
1.
r market = 0.12 or 12%
2.
r stock = 0.12 or 12%
3.
r Stock = 0.169 or 16.9%
Explanation:
The required rate of return can be calculated using the CAPM or Capital asset pricing model equation. The formula for required rate of return under this model is,
r = rRF + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium on marketr represents the required rate of return1.
The beta of the market is always considered to be 1. Thus, the required rate of return on market would be,
r market = 0.05 + 1 * 0.07
r market = 0.12 or 12%
2.
For a stock whose beta is 1.0, the required rate of return would be same as that for market. So, the required rate of return for a stock with a beta of 1.0 is,
r Stock = 0.05 + 1 * 0.07
r Stock = 0.12 or 12%
3.
The required rate of return for a stock with a beta of 1.7 is,
r Stock = 0.05 + 1.7 * 0.07
r Stock = 0.169 or 16.9%
Which description is the best example of human capital?
Explanation:
Human capital is the economic value of the abilities and qualities of labor that influence productivity. These qualities include higher education, technical or on-the-job training, health, and values such as punctuality. Investment in these qualities improves the abilities of the labor force.
Diversity groups identified in the market today can include extroverts, introverts, atheists, and the religious.
a) true
b) false
Answer: True
Explanation:
It us true that the diversity groups identified in the market today can include extroverts, introverts, atheists, and the religious while the introverts are rather shy, reserved and not sociable.
The atheists don't believe in God while the religious believe there is a supreme being who is being worshipped.
A bank is insolvent when its liabilities exceed its assets. its assets increase in value. its assets exceed its liabilities. its capital exceeds its liabilities.
Answer:
The answer is A. when its liabilities exceed its assets.
Explanation:
Insolvency is the state of not being able to pay its long-term debt or liability. If a liability exceeds assets, the company is at the risk of liquidation, it becomes a going concern issue. And meeting its short term obligation (liquidity) or long-term obligation (solvency) is in doubt.
One of the ratio to determine insolvency is debt-to-equity ratio.