Question

PART B. The part of the exam is worth 5 Points - BRIEF Essay In the space below provide a brief essay on the following topic. Please follow the rules. TOPIC We are experiencing an unusual period in US GAAP reporting. More and more companies are reporting Negative Balances for TOTAL Equity. In class meetings we reviewed the Balance Sheets of McDonald's and American Airlines to see two examples of this. Negative equity is counter-intuitive. That means it is both unexpected and on first look seems wrong. It also means we may not fully understand how it impacts the Balance Sheet equation. That is because we expect TOTAL EQUITY to be positive. Please write a BRIEF essay that identifies three causes for Negative Equity. (We discussed them.) The RULES No Title is needed. The essay MUST be typed into the space below. It CANNOT be longer than 50 words. Please count the words before handing this in! It CANNOT contain more than 10 sentences. Please count them before handing this in! It can have more than I paragraph, but given the brevity requested, one paragraph is better. Bricfer essays with less than 10 sentences and less than 100 words will be rewarded! You are strongly encouraged to use the Word Based Spell check and Grammar check functions. Please do NOT hand in an essay with misspellings. Each sentence must be a sentence. Each phrase normally will be a sentence if it contains one noun and onc verb. Do NOT use run-on sentences. If the sentence goes on past two lines in Word, it is too long. If the sentence has the following words in it, then it is probably a run-on sentence and should be broken up to short sentences: and, but, because, although, however, therefore cte. If you find your phrase, which you think is a sentence, contains two verbs, it is probably a run-on sentence and should be split up, using the rule that cach sentence needs (at least) one verb. Considering the space limit you can use single spacing. Double spacing will also be accepted. It is up to you to choose. GOOD LUCK! ITIT TTTTT

Answer 1

Solution:

Negative shareholder's equity is a red flag for investors because it means a company's liablities exceeds its assets. Reasons for a company's negative shareholders' equity include accumulated losses over time, large dividend payments that have depleted retained earnings, and excessive debt incurred to cover accumulated losses.