Explain the concept of financial insolvency and compare it with technical bankruptcy.

Insolvency is the inability of a debtor to pay its debts. Financial insolvency means failure of a firm to meet its current obligation. The failure could be temporary or might be remedial. In other words it is a situation where liabilities of the firm exceeds the assets, i.e., net worth becomes negative, bankruptcy happens. That is financial insolvency. Technical bankruptcy can be ascertained through comparing current assets and current liabilities. For this purpose, trend analysis to be made of past three to five years to pick up signals of bankruptcy if any.