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(ECONOMICS) crisis created when a government or firm cannot pay its obligations in any reasonable time frame. Often confused with illiquidity, which is a when an entity suffers a temporary shortage of cash.

When a firm has assets that are greater than liabilities, it is solvent. In a lot of cases, the management of a firm runs out of ways to make money with the assets it has, so it "invests" in poor quality assets with high risk of default (for example, by lending money to borrowers using inflated housing prices as collateral).
Most of the time, insolvency is the result of corrupt or feckless management. In a few cases, however, it can be the result of a vicious cycle in which a well-managed company's customers all become insolvent first.
by Abu Yahya May 04, 2010
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Aug 8 Word of the Day
A method of guessing on a multiple choice test that involves looking at the position of the second hand. If the hand is between 12 and 3 the guess is A. If the hand is between 3 and 6 the guess is B. Between 6 and 9 guess C. Between 9 and 12 guess D.
I passed my test! Thanks to the Clock Method
by ET4444 November 12, 2007
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