Question

Who of the following people is most in danger of being personally bankrupt? Assume that all...

Who of the following people is most in danger of being personally bankrupt? Assume that all of their businesses' assets are highly liquid and can therefore be sold immediately.

Select one:

a. Alice has $5,000 cash, owes $20,000 credit card debt due immediately and 100% owns a sole tradership business with assets worth $30,000 and liabilities of $10,000.

b. Billy has $5,000 cash, lent $20,000 to his friend, and doesn't have any personal debt or own any businesses.

c. Carla has $5,000 cash, owes $10,000 credit card debt due immediately and 100% owns a corporate business with assets worth $20,000 and liabilities of $30,000.

d. Darren has $10,000 cash, owes $20,000 credit card debt due immediately and 100% owns a sole tradership business with assets worth $40,000 and liabilities of $10,000.

e. Ernie has $10,000 cash, owes $10,000 credit card debt due immediately and 100% owns a corporate business with assets worth $20,000 and liabilities of $40,000.

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Answer #1

Carla have a higher chance of personal bankruptcy because she does not have enough cash to repay the credit card immediately and her business is also having a deficiency when it will come to matching of asset with a liability.

Ernie has a lower risk because he has immediate cash payment in order to discharge the credit card debt.

Correct answer is option (C) Carla has $5000 cash, $10000 credit card due immediately, and 100% on our corporate business with asset worth $20000 and liability of $30000.

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