Insolvency

Insolvency (Definition)

Insolvency is the state of being unable to pay the money owed, by a person or company, on time.

Key aspects of insolvency include:

1. Can occur when liabilities exceed assets or when unable to pay debts as they fall due
2. May lead to bankruptcy proceedings if not addressed
3. Can result from poor cash flow management, economic downturns, or unexpected liabilities
4. Often requires restructuring of debts or liquidation of assets
5. Has legal implications and can affect relationships with creditors and stakeholders
6. Early warning signs include consistent losses, chronic negative cash flow, and increasing debt
7. Understanding insolvency risks is crucial for financial management and strategic planning

Recognizing and addressing insolvency issues early is critical for potentially saving a business and minimizing losses to creditors.