Insolvency Risk

Posted in Finance, Accounting and Economics Terms, Total Reads: 826

Definition: Insolvency Risk

Insolvency risk is defined as the risk that an individual or company will not be able to meet its debt obligations. This can be due to less cash reserves and decreasing cash inflows or increasing cash outflows from the company.

Insolvency risk is also known as bankruptcy risk, and generally financial institutions like banks assess this risk before granting a loan to a customer and thus try to minimize the chances of the customer defaulting on the loan.

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