Solvency: meaning, definitions and examples
💰
solvency
[ ˈsɒlvənsi ]
financial stability
Solvency refers to the ability of an individual or organization to meet its long-term debts and financial obligations. This concept is crucial for assessing the financial health of companies, as it indicates whether they can continue operations without the risk of bankruptcy. A solvent entity has a positive net worth, meaning its assets exceed its liabilities. Tracking solvency helps investors, creditors, and stakeholders to make informed decisions about financial risks. In practical terms, a solvent business can generate enough revenue to cover its liabilities comfortably.
Synonyms
financial stability, fiscal strength, liquidity
Examples of usage
- The company is in a strong position of solvency after securing additional funding.
- Monitoring solvency is essential for preventing financial crises.
- Investors prefer to invest in firms with high solvency ratios.
Translations
Translations of the word "solvency" in other languages:
🇵🇹 solvência
🇮🇳 संपत्ति
🇩🇪 Zahlungsfähigkeit
🇮🇩 solvabilitas
🇺🇦 платоспроможність
🇵🇱 zdolność płatnicza
🇯🇵 支払い能力
🇫🇷 solvabilité
🇪🇸 solvencia
🇹🇷 ödenebilirlik
🇰🇷 지급 능력
🇸🇦 القدرة على السداد
🇨🇿 schopnost splácet
🇸🇰 platobná schopnosť
🇨🇳 偿付能力
🇸🇮 plačilna sposobnost
🇮🇸 greiðsluhæfi
🇰🇿 төлем қабілеттілігі
🇬🇪 გადახდის უნარი
🇦🇿 ödəmə qabiliyyəti
🇲🇽 solvencia
Etymology
The term 'solvency' is derived from the Latin word 'solvens', which means 'loosen' or 'free'. This is related to the verb 'solvere', meaning 'to loosen, free, pay, or solve'. The transition into financial terminology started in the mid-19th century when economists began to use this term to describe an entity's ability to pay its long-term debts. Over time, solvency evolved to encompass broader considerations of financial health, including asset management and overall fiscal responsibility. As businesses and government financing grew in complexity, so did discussions around solvency, leading to more stringent regulations and definitions which we see in contemporary financial analysis.