This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
A second type of insolvency is that which exists when an enterprise that possesses a greater total of assets than of liabilities is unable to meet its obligations. This type is sometimes called "technical" insolvency or "financial" insolvency. It may easily happen that an enterprise which is a great business success may in this sense become insolvent. There have been previous references to the two insolvencies and reorganizations of the Westinghouse Electric and Manufacturing Company, which has been a big money-making enterprise. Various other examples have been given of insolvency due to lack of adequate working capital and need not here be repeated.
This second type of insolvency is probably more common than the first. It is due, not to the intrinsic weakness in the business, but to errors in its financial management.