Consolidating company liquidation
24-Aug-2020 18:35
You can be insolvent without being bankrupt, but you can’t be bankrupt without being insolvent. Many people think of the two as the same thing, but they are very different.Insolvency is a problem that bankruptcy is designed to solve.Financial advisors will review business operations, suggest scenarios for reducing or eliminating debt and suggest a course of action.Staying in business might require that the company convince its creditors that it has made the correct assumptions about future cash flows, but many times businesses and their lenders don’t see eye to eye.To make things a little more complicated, insolvency comes in two flavors.The first, called “cash-flow insolvency,” occurs when an insolvent debtor can’t make a payment because he doesn’t have the money.
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In the first case, the debtor doesn’t have the money to make a payment when it’s due; in the second it might be possible to make a payment with cash on hand, but financial collapse might not be far off.Paying debts will deplete cash and that leads to cash-flow insolvency.
