Enter the total assets value and total liabilities value into the calculator to determine the insolvency amount. This calculator can also evaluate any of the variables given the others are known.
Insolvency Formula
The following formula is used to calculate the insolvency amount.
IA = TA - TL
Variables:
- IA is the insolvency amount ($)
- TA is the total assets value ($)
- TL is the total liabilities value ($)
To calculate the insolvency amount, subtract the total liabilities value from the total assets value. If the result is negative, it indicates insolvency.
What is Insolvency?
Insolvency is a financial state of being unable to pay debts owed on time. It is a legal term used to describe both individuals and businesses who cannot meet their financial obligations to lenders and creditors. Insolvency can lead to legal proceedings in which assets may be liquidated to pay off outstanding debts. It is often confused with bankruptcy, but insolvency is a financial condition, while bankruptcy is a legal declaration.
How to Calculate Insolvency?
The following steps outline how to calculate the Insolvency:
- First, determine the total assets value (TA) ($).
- Next, determine the total liabilities value (TL) ($).
- Next, gather the formula from above = IA = TA – TL.
- Finally, calculate the Insolvency amount (IA).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge.
total assets value (TA) ($) = 500
total liabilities value (TL) ($) = 300
