Solvency

From Financial Literacy Wiki

Solvency is a measure of an entity's ability to pay interest as it comes due and to repay the face value of debt at maturity. In other words, it is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity. Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term expansion and growth.

To measure a company's solvency, we look at the solvency ratios like Debt to Total Asset Ratio or Cash Debt Coverage Ratio.

For more information on the Solvency Ratio, please click here