Insolvency

A situation in which liabilities exceed assets and unable to pay liabilities is called insolvent.

Insolvency is that the inability of a debtor to pay their debt. income insolvency involves a lack of liquidity to pay debts as they fall due. balance sheet insolvency involves having negative net assets, wherever liabilities exceed assets. insolvency isn't a word for bankruptcy, that may be a determination of insolvency made by a court of law with resulting legal orders meant to resolve the insolvency.

A business be cash-flow insolvent however balance-sheet solvent if it holds market liquidity assets, notably against short term debt that it cannot immediately realize if known as upon to try and do so. Conversely, a business will have negative web assets showing on its balance sheet however still be cash-flow solvent if in progress revenue is able to fulfill debt obligations, and so avoid default: for example, if it holds long term debt. Some large corporations operate permanently in this state.