Is it possible for a company to have a negative book equity value?

A company can indeed have a negative book equity value, and this situation often arises when a company accumulates significant losses over time. Book equity is calculated as total assets minus total liabilities. When a company has substantial losses that reduce its retained earnings or when liabilities exceed assets, the result can be a negative equity value.

Accumulated losses can occur due to various factors, including poor management decisions, economic downturns, or substantial operational challenges. If the losses persist and exceed the amount of equity that was previously built, the equity position might dip into the negative territory. Thus, the correct answer reflects the reality that financial performance directly impacts equity and that sustained losses can lead to a negative book equity scenario. This financial metric can be indicative of deeper issues within the company and is often scrutinized by investors and stakeholders.