What scenario describes insolvency?

Insolvency refers to a situation where a company is unable to meet its financial obligations, typically when its liabilities exceed its assets or when it cannot pay its debts as they come due. This scenario indicates a critical financial state where the organization lacks the necessary resources to settle its outstanding debts, which can lead to bankruptcy if not addressed.

The other options, while they reflect various aspects of a company’s financial activities, do not represent insolvency. Expanding an asset base suggests growth and financial health; recording high profits indicates that the company is operating successfully and is likely in a strong financial position; and converting shares to cash typically demonstrates liquidity, not solvency issues. These activities point towards a company that is managing its finances effectively, rather than struggling to meet obligations.