The TL;DR is that Lorraine Williams ran a bust-out operation on TSR. She maxed out every credit line the company had, dreamed up new ways for the company to get credit, did everything she could to delay payments to creditors, all so she could maximize cash payouts to her own bank account. The most egregious example was the up-front royalties she got for licensing Buck Rogers to TSR for products made, rather than sold, so of course she had them make tons of crap that didn't sell and took a cut each time. When the bills came due, well, gee, that was just too bad for TSR.
She owned the IP and got royalties for every product printed. And no, she didn't have to pay them back when the product didn't move. So yes, she had the company she was owner and CEO of ink a sweetheart deal with herself to have the corporate bank account pay hers out of investor cash for producing products that didn't sell.
The reason there were so many settings and variation is that TSR had a sweet deal with Random House where they got paid a cash advance for every product printed and delivered. They were encouraged by management, all the way up to Williams to deliver as much product as they could, as quickly as they could, and even internally referred to RH as, "The bank of Random House."
Every single choice in the company's direction after Gygax left is 100% Williams' fault. Sure, you can't blame a leader for inherited problems, but you can blame them for every decision they make about what to do next. Who else's fault would it be? She was owner and president. If she didn't like the unethical way they were using their credit with their printer or abusing their RH contract, she could have fired people and hired new ones. If she didn't like what a mess the books were, she could have fired their accountant and hired a new one. She did none of this and focused instead on inventing ways to transfer cash from TSR's bank account to hers.
The fact is that when WotC took over, it took them only one year to turn TSR profitable on a cash flow basis. They did nothing Williams couldn't have done.