AQA GCSE Business · 8132
Paper 2
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GCSE Business · key term
The inability of a business to pay its debts when they fall due.
Used by AQA and Edexcel
Paper 2
Specification 1.3.3 · Paper 1
A situation in which a business cannot pay its debts when they are due.
Revise: Cash and Cash-FlowA business that cannot pay its debts when they fall due faces insolvency and may have to stop trading. Having enough cash available at the right time therefore helps prevent business failure. Positive net cash flow builds the cash balance, but a business does not need positive net cash flow every single month: cash saved from earlier months can cover a temporary shortfall.
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