Bankruptcy problem

Okay kiddo, so imagine you have a piggy bank where you keep all your money. If you suddenly find yourself spending more money than you have, you might not have enough left in your piggy bank to buy the things you need.

Now imagine this on a bigger scale, like a grown-up business. If a business spends more money than it makes, it might have to borrow money from other people or banks to keep going. But if it keeps doing this for a long time and can't pay it back, it might have to declare bankruptcy.

Bankruptcy is like admitting that the business doesn't have enough money to pay all its debts. Instead of losing everything, the business might have to sell some things it owns, like buildings or equipment, to pay back the people it owes money to. This can be really hard on the business, its employees, and the people who loaned money to it.

In some cases, the people who own the business might have to sell their own things, like their house or car, to pay back the debts. It's like taking money out of their own piggy bank to pay back the people who they borrowed from.

So, it's important to always make sure that you only spend the money you have and to save some for a rainy day, just like you do with your piggy bank. Because you don't want to end up in a bankruptcy problem that can be really hard to fix.