insolvency

insolvency
/in sol"veuhn see/, n.
the condition of being insolvent; bankruptcy.
[1650-60; INSOLV(ENT) + -ENCY]

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Condition in which liabilities exceed assets so that creditors cannot be paid.

It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet approach means that total liabilities exceed total assets.

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      financial condition in which the total liabilities of an individual or enterprise exceed the total assets so that the claims of creditors cannot be paid. There are essentially two approaches in determining insolvency: insolvency in the equity sense and under the balance-sheet approach. Insolvency in the equity sense denotes the inability of the debtor to pay his debts as they become due in the ordinary course of business. Insolvency under the balance-sheet approach means that the total liabilities of the debtor exceed his total assets.

      Insolvency is distinguished from bankruptcy in that bankruptcy denotes a particular legal status to be determined and declared by judicial decree. For an individual or a corporation to be declared bankrupt, certain additional requirements, such as committing an act of bankruptcy, for example, are necessary. Thus, insolvency, although an essential factor, is not the sole ingredient necessary in determining bankruptcy.

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Universalium. 2010.

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  • Insolvency — means the inability to pay one s debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts. Business insolvency is defined in two different ways: Cash flow insolvency Unable… …   Wikipedia

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  • insolvency — 1660s; see INSOLVENT (Cf. insolvent) + CY (Cf. cy). Insolvence (1793) is rare …   Etymology dictionary

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  • Insolvency — When an individual or organization can no longer meet its financial obligations with its lender or lenders as debts become due. Insolvency can lead to insolvency proceedings, in which legal action will be taken against the insolvent entity, and… …   Investment dictionary

  • insolvency — The condition of a person or business that is insolvent; inability or lack of means to pay debts. Such a relative condition of a person s or entity s assets and liabilities that the former, if all made immediately available, would not be… …   Black's law dictionary

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