Young Lawyer Focus: Financial Statement Analysis in Determining Solvency

Once the last page of a mystery novel is read, all of the hidden clues along the way become crystal clear. Similarly, once an entity declares its insolvency and seeks protection under the U.S. Bankruptcy Code, it is easy to point to all of the conditions leading up to this now inevitable conclusion. Establishing that an entity is in fact insolvent is its own distinct exercise. However, analyzing and cataloging the degradation of financial condition along the way requires, in some part, an ability to extract meaningful information from financial statements issued by the entity in the periods preceding its insolvency. This article is designed as a quick introduction to