Lack of enough assets to cover debts is what makes a business be termed as being insolvent. Also, the inability of a company to pay its dues as and when they are due is a situation which leads to its being in the same position.

The act of not being able to clear your debts before the due date can be generalised as Insolvency. This definition is used widely with respect to businesses. There are two types of Business insolvency namely, Cash Flow Insolvency and Balance Sheet Insolvency. The first type refers to the inability of a company or business to clear its debts while the second type refers to having excess liabilities i.e. more liabilities than assets. Personal Insolvency takes both your cash flow and assets together into consideration.