solvency

/'sɔlvənsi/

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Word: Solvency

Part of Speech: Noun

Definition: Solvency refers to a person’s or company's ability to meet their financial obligations when they come due. In simpler terms, it means having enough money to pay off debts and other bills on time.

Usage Instructions:

• Solvency is often used in financial contexts, especially when discussing businesses and their ability to stay afloat financially.
• When using the word, think about whether the subject (a person or a company) can pay its debts.

Example:

• "After reviewing the company's financial statements, the accountant confirmed that the business was in a strong position of solvency."

Advanced Usage:

• In finance, solvency is a crucial indicator of a company's financial health. Analysts often look at solvency ratios, which compare a company's total assets to its total liabilities, to assess whether a company can cover its long-term debts.

Word Variants:

• Solvent (adjective): Describes someone or something that has enough money to pay debts.
  • Example: "The solvent company was able to invest in new projects."
• Insolvency (noun): The state of being unable to pay debts.
  • Example: "The company's insolvency led to its bankruptcy."

Different Meanings:

• In a general context, solvency is strictly financial. However, in a metaphorical sense, it can refer to the ability to resolve issues or challenges, though this is less common.

Synonyms:

• Financial stability
• Fiscal health
• Liquidity (though liquidity refers more specifically to having cash or easily convertible assets)

Related Idioms and Phrasal Verbs:

• There are no specific idioms or phrasal verbs that directly relate to "solvency," but you might hear phrases like "in the black" (meaning a positive financial state) or "tighten one's belt" (meaning to spend less due to financial constraints).

Summary:

To summarize, solvency is an important financial term that indicates whether someone can meet their financial responsibilities.

Academic

Noun

1. the ability to meet maturing obligations as they come due