What does a company enter when it cannot settle its debts in full?

Insolvency refers to a financial situation where a company is unable to meet its debt obligations as they come due or when its liabilities exceed its assets. When a company is insolvent, it indicates a fundamental lack of financial resources to cover its debts, potentially leading to further actions such as bankruptcy proceedings.

Choosing insolvency highlights that the company recognizes its inability to fulfill its debt commitments and that it may need to consider restructuring options, negotiating with creditors, or possibly moving toward formal bankruptcy proceedings if the situation does not improve. Understanding insolvency is crucial for financial management and decision-making, as it represents a turning point where the company may need to take significant actions to address its financial distress.

The other options do have relevance in the context of financial difficulties; however, they do not specifically capture the precise legal or financial status implied by the inability to settle debts in full. Bankruptcy is a legal proceeding initiated when a company formally declares its inability to pay debts. Debt resolution and financial hardship are terms that describe processes and conditions but do not reflect the specific financial status of insolvency, which is directly related to the inability to pay debts as they come due.