AskDefine | Define solvency

Dictionary Definition

solvency n : the ability to meet maturing obligations as they come due [ant: insolvency]

User Contributed Dictionary

English

Etymology

Noun

  1. the state of having enough money to pay all of one's debts; the state of being solvent

Translations

can pay debts

Extensive Definition

In finance, solvency is the ability of an entity to pay its debts with available cash. 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. The better a company's solvency, the better it is financially. When a company is insolvent, it means that it can no longer operate and is undergoing bankruptcy.
Solvency is a different concept from profitability, which refers to the ability to earn a profit. Businesses can be profitable without being solvent (e.g. when they are expanding rapidly). Businesses can be solvent even while losing money (e.g. when they cannibalize future cash flows, like selling accounts receivable). A business is bankrupt when it is unprofitable and insolvent.

See also

solvency in Russian: Кредитоспособность
solvency in Ukrainian: Кредитоспроможність
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