Answer (C) is correct . An insolvent firm may agree to be acquired by a stronger firm or it may sell important assets, slash costs, issue additional securities, negotiate with creditors to restructure its obligations, or exchange equity for debt. It may also choose a reorganization in bankruptcy. A final option is bankruptcy liquidation.
Answer (A) is incorrect because The firm is more likely to cut costs.
Answer (B) is incorrect because An insolvent firm is more likely a takeover target.
Answer (D) is incorrect because The firm is more likely to issue additional stock to raise money.
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