failure of a company to meet its obligations as they become due. An analysis of insolvency concentrates on the operating and capital structure of the business. The proportion of long-term debt in the capital structure must also be considered.
inability to pay debts as they mature, or as obligations become due and payable. A person may still have an excess of assets over liabilities, but be insolvent if unable to convert assets into cash to meet financial obligations.
A financial institution, such as a bank, generally is considered to be insolvent if its ratio of capital to assets is at, or close to, zero, or if its capital assets, including common stock, are of such poor quality that its continued existence is uncertain.
- inability to meet financial obligations as they mature in the ordinary course of business.
- excess of liabilities over assets at any given time. See also bankruptcy.
inability to pay debts when due.
bankruptcy. If an insured business firm becomes bankrupt, the circumstance does not relieve an insurance company of its obligations under an insurance contract.
