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Explain the term Insolvent

Explain the term Insolvent in brief associating to debt?

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Insolvent is a company or person who is unable to reimburse his debt. In simple words, a person or company has not adequate money or asset for paying the entire debt. Assets are less than liabilities are capital. However due to losses, it might possible, company or that person is working on zero capital. At that time, the risk of insolvency might take place when creditors request their money. When company gets loan from exterior by his goodwill in market, then that company can protect from winding up or insolvency. Or else, court declares company as insolvent. The conditions of a sole trader are different. The Sole trader can utilize his personal assets for paying his business loan. When the total of business and personal assets are less than his net liabilities, at that time, he can become insolvent.

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