The correct answer is C.

XYZ Corporation is both insolvent and in default but has not yet declared bankruptcy. Insolvency refers to a financial state where liabilities exceed assets, indicating that the company cannot cover its debts with its current assets. Default occurs when a company fails to meet its debt obligations, such as missing scheduled payments. Bankruptcy is a legal process involving court intervention, which XYZ Corporation has not yet entered.

A is incorrect because insolvency alone does not capture the scenario of missed payments, which indicates default. A company can be insolvent without being in default if it still meets its payment obligations.

B is incorrect because the scenario clearly states that the company's liabilities exceed its assets, indicating insolvency. Default does not automatically imply insolvency, as a company might miss payments for reasons other than financial distress.

D is incorrect because bankruptcy is a legal status that has not been declared in this scenario. Additionally, bankruptcy often follows insolvency and default, but they are distinct processes with different implications.

Things to Remember

• Insolvency is a financial condition where a company's liabilities exceed its assets, but it does not necessarily imply default or bankruptcy.
• Default occurs when a company fails to fulfill its debt obligations, such as missing payments, regardless of its solvency status.
• Bankruptcy is a legal process that a company might enter following insolvency and default, but it requires legal proceedings and court involvement.