Flow-based insolvency is defined as:

Question

Quizplus · Accepted Answer

Flow-based insolvency refers to the situation where a company has an insufficient operating cash flow to meet its current financial obligations, such as paying bills and meeting payroll. It is different from balance sheet insolvency (answer A) which refers to the situation where a company's liabilities exceed its assets, and negative equity position (answer B) which refers to a situation where a company's liabilities are greater than its assets. Negative cash flow in any one period (answer C) or negative net profit for the year (answer D) may indicate financial difficulties, but they do not necessarily result in flow-based insolvency.

Flow-Based Insolvency Is Defined As