Insolvency Risk

The likelihood that a company will be unable to meet its debt obligations and therefore bankrupts. Insolvency risk is a measurement representing the probability of a company becoming insolvent as a result of its inability to service its debt. Investors often consider a firm’s insolvency risk prior to making equity or bond investment decisions. Firms with a high risk of insolvency/bankruptcy may find it difficult to raise capital from investors or creditors.
Also known as bankruptcy risk.