For example, if the company had $10 million in loss reserves, $5 million in
cash, and no other material assets or liabilities, such company may be in
trouble. On the other hand, if they have $10 million in loss reserves, $11
million in cash, but other liabilities included a $10 million subordinated-debt
to the parent company, and $5 million negative equity, there may be no real
threat to their claims-paying ability.
I guess my concern is this: If you simply mention the negative surplus without
explanation, the user may draw as incorrect an inference as they might draw if
you say nothing. On the other hand, if you fail to mention the negative
surplus, an UNINFORMED reader may draw the wrong inference only if they fail to
read the financial statements.
I don't know enough facts to recommend a course of action, but I wanted to
provide you another viewpoint. (You may want to inquire of the ABCD, in their
counseling role.)
Good luck.
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