ford motor company in negative equity, but not under bankruptcy protection?
Hi, I am beginning to study accounting, so I was studying ford motor co. balance sheet, and see that they have negative equity (for couple of years now!), but seems like they're not under any kind of bankruptcy protection act? doesnt negative equity mean that company owes more then its worth, and should go under some kind of bankruptcy protection? at least thats what my textbook saids. looks like ford proved me wrong, or am i misunderstanding something? please clarify! thanks ;)
- Ed AtunLv 710 years agoBest Answer
You understand correctly. In many ways, they should be in bankruptcy.
If anyone is willing to loan them money to remain in business ( and pay their bills and salaries), they don't have to declare bankruptcy. They still have money to spend even tho it is borrowed and their true "equity" is negative.
That is what is happening today. They are staying alive on borrowed money.