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Definition: Insolvent

An insolvent is an individual or company that is not able to repay its debts and thus defaults on its obligations. Insolvents generally are moving towards bankruptcy and the main reason is the liabilities of the company exceeding its assets and leading to negative cash flows into the company.

Insolvent is quite a lot used interchangeably with bankrupt or bankruptcy.

Insolvency can occur due to poor cash inflows or unplanned increase in expenses or taxes.

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