solvency

/'sɔlvənsi/

Thân thiện

A company's solvency is demonstrated by its ability to pay its bills on time.

Definition

1. Noun:
   • The ability to meet maturing obligations as they come due: Solvency is the financial condition of an entity (a person, company, or government) having sufficient assets to cover its liabilities. It indicates the capacity to pay debts in the long term.

Usage

• Solvency is a key financial health metric, contrasting with insolvency.
• It is often assessed by comparing total assets to total liabilities.
• The term is primarily used in financial, economic, and legal contexts.

Examples

• Noun:
  • The company's strong balance sheet ensured its solvency even during the economic downturn.
  • Regulators monitor banks to maintain their solvency and protect depositors.
  • Personal solvency is crucial for obtaining a mortgage.

Advanced Usage

• "Technical solvency": A state where an entity's assets exceed its liabilities on paper, though some assets may not be easily convertible to cash.
• "Going-concern solvency": The ability to pay debts as they mature while continuing normal business operations indefinitely.

Variants and Related Words

• Solvent (adj): Describing an entity that is able to pay its debts.
  • After selling the property, the estate was finally solvent.
• Insolvency (n): The opposite state; inability to pay debts.
• Solvency ratio (n): A specific financial metric used to measure solvency, such as debt-to-equity.

Synonyms

• Financial stability
• Creditworthiness (though this more specifically relates to the likelihood of receiving credit)
• Fiscal health

Antonyms

• Insolvency
• Bankruptcy

Related Phrases

• "Test of solvency": An evaluation to determine if an entity can meet its long-term financial commitments.
  • The audit included a rigorous test of solvency.
• "Margin of solvency": The excess of assets over liabilities, indicating a safety buffer.
  • The firm maintained a comfortable margin of solvency.

Học thuật

Noun

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