Question

Which of the following statements are true? a) A business whose liabilities are greater than its assets have a bad financial position. b) A business whose liabilities are greater than its owner’s equity has a bad financial position. c) A business whose assets are greater than its owner’s equity has a bad financial position. d) a) and b) e) All the above

Answer 1

Answer:

d) a&b.

Explanation:

a) If a business has Liabilities more than assets then it means the business is weak in terms of financial position.

b) If the outside Liability is more than equity then it means the business is running on outside debt. Which also indicates bad financial position.