Math Snap
PROBLEM
Identify which situation indicates a person is insolvent:
1. Assets $56,400; expenses $61,100
2. Assets $78,400; net worth $23,100
3. Liabilities $45,400; net worth $7,100
4. Assets $40,400; liabilities $46,100
STEP 1
Assumptions1. Insolvency is a financial state in which a person's liabilities exceed their assets.
. The assets, liabilities, annual expenses, and net worth are given in the problem.
3. The net worth is calculated as the difference between assets and liabilities.
STEP 2
First, let's define the condition for insolvency. A person is insolvent when their liabilities are greater than their assets.
STEP 3
Now, let's analyze each of the given situations to determine which one meets the condition for insolvency.
For the first situationAssets = $56,400; annual expenses = $61,100In this case, we are comparing assets with expenses, not liabilities. Therefore, we cannot determine insolvency from this information.
STEP 4
For the second situationAssets = $78,400; net worth = $23,100In this case, we are given the net worth, not liabilities. However, we know that net worth is calculated as assets minus liabilities. Therefore, we can calculate liabilities as follows
STEP 5
Plug in the values for assets and net worth to calculate liabilities.
Liabilities = \($\)78,400 - \($\)23,100
STEP 6
Calculate the liabilities.
Liabilities = \($\)78,400 - \($\)23,100 = \($\)55,300In this case, liabilities ($55,300) are less than assets ($78,400), so the person is not insolvent.
STEP 7
For the third situationLiabilities = $45,400; net worth = $7,100In this case, we are given liabilities and net worth, but not assets. Without knowing the assets, we cannot determine if the person is insolvent.
STEP 8
For the fourth situationAssets = $40,400; liabilities = $46,100In this case, we are given both assets and liabilities. We can compare these to determine if the person is insolvent.
SOLUTION
Compare the assets and liabilities.
\($\)46,100 > \($\)40,400In this case, liabilities ($46,100) are greater than assets ($40,400), so the person is insolvent.
The situation that describes a person who could be insolvent is Assets $40,400; liabilities $46,100.
