In the latter condition, a company's debts may be under control. But it lacks the cash flow to pay for raw materials and wages and to keep up its interest payments. It is bleeding, perhaps in a coma, but does not have to die. Unless, of course, it cannot get the cash flow to stay alive. But remember the difference between insolvent and illiquid.
Many solvent firms are at risk of turning insolvent since their liquidity positions are weak.
Crippled as they are, such companies may have difficulty obtaining credit for working capital in order to keep going. Restoring credit flows to these solvent companies is one of the crucial hurdles to restarting growth in Asia. That said, a surprisingly large majority of nearly two-thirds of respondents said they are not experiencing inadequate liquidity. The difference between the devastation implied by theory and the relatively benign reality can be explained by a variety of factors - for example the defacto debt moratoriums in place in several economies. But such special conditions cannot last forever.