Final answer:
Option (B), A firm with negative cash flow from assets has spent more than it has brought in, which can happen for a variety of reasons, such as selling more assets than it purchased.
Step-by-step explanation:
When a firm has a negative cash flow from assets, it means that the firm has spent more cash on investing or operating activities than it has brought in. This can happen for various reasons such as increasing capital expenditure, repaying debt, or a change in working capital requirements. One potential scenario that would result in a negative cash flow from assets is if the firm sold more assets than it purchased, hence option B) The firm sold more assets than it purchased must be true.
Understanding Bankruptcy in Financial Terms
A bank or any firm might face bankruptcy if its assets are worth less than its liabilities, leading to negative net worth. This situation can be understood by examining the firm's T-account where assets equal liabilities plus net worth. Should net worth become negative, it indicates financial distress which could lead to bankruptcy.