Insolvency can be defined as:

Question

Quizplus · Accepted Answer

Insolvency refers to the situation where a person or business is unable to repay their debts as they fall due. It is different from being illiquid (option B), which refers to a temporary cash shortage that can be overcome by borrowing, selling assets, or obtaining credit. Option A is too narrow in scope as insolvency can occur even if a person or business has some cash. Option D is incorrect because the inability to increase debts is not a necessary condition for insolvency. Option E is also incorrect since it only considers the present value of payments and not the overall ability to repay debts.

Insolvency Can Be Defined As