QUESTION 64
WHAT’S THE DIFFERENCE BETWEEN INSOLVENCY AND BANKRUPTCY?
Why it’s important: As with cash and profit, confuse these terms in a discussion and you’ll lose credibility.
Insolvency refers to cash. Bankruptcy relates to assets and liabilities.
INSOLVENCY:
Occurs when an organisation has insufficient cash to pay its debts as they fall due.
Can be a temporary affair lasting just a few days or weeks as the organisation waits for a large payment, or it can be an early sign that things are going downhill.
Look out for signs of insolvency; for example, suppliers complaining that they haven’t received payment or that payments are unusually late; delays ...
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