insolvency
Sign in to saveIn accounting, insolvency is the state of being unable to pay the debts, by a person or company (debtor), at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency.
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Encyclopedic overview
27 sectionsContents
- Technical definitions
- Consequences
- Debt restructuring
- Government debt
- Law
- Anguilla
- Australia
- British Virgin Islands
- Canada
- Germany
- Hong Kong
- India
- Iran
- Ireland
- Russia
- South Africa
- Switzerland
- Turkey
- United Kingdom
- Insolvency Act 1986
- Procedures
- Receivership
- United States
- See also
- References
- Further reading
- External links
In accounting, insolvency is the state of being unable to pay the debts, by a person or company (debtor), at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency.
Cash-flow insolvency is a condition in which a person or company has enough assets to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and a valuable car, but not have enough liquid assets to pay a debt when it falls due. Cash-flow insolvency can usually be resolved by negotiation. For example, the bill collector may wait until the car is sold and the debtor agrees to pay a penalty.
Excerpted from Wikipedia’s “insolvency” article, available under the CC BY-SA 4.0 licence.