Clues That May Indicate an Entrepreneur is Insolvent or Approaching Insolvency

Entrepreneur Insolvency
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Introduction
A state of insolvency for a business is when the entrepreneur cannot pay bills, entering a state of financial distress. The consequences of entering insolvency are severe. Entrepreneurs should therefore understand the early warning signs of insolvency and take action to prevent getting into an unredeemable position.
An entrepreneur may be insolvent or approaching insolvency based on several clues. First, reaching a maximum borrowing limit in the bank and other financial institutions may mean that the entrepreneur has long overdue loans and cannot stand on their own (Bullivant, 2016). Secondly, the absence of reliable management information such as cash flow reports, debtors’ reports, and sales forecasts makes it challenging to track the business’ progress with insufficient management information (Bullivant, 2016). Thirdly, an entrepreneur may be insolvent or approaching insolvency based on insolvency tests. Thes...