Solvency refers to the ability of an enterprise to repay long-term and short-term debts with its assets. Whether an enterprise has the ability to pay cash and repay debts is the key to its healthy survival and development. The solvency of an enterprise is an important symbol reflecting its financial situation and operating ability.
Solvency is the ability of an enterprise to undertake or guarantee debts due, including the ability to repay short-term debts and long-term debts. The solvency of an enterprise, statically speaking, is the ability to pay off debts with its assets; Dynamically speaking, it is the ability to repay debts with the assets of the enterprise and the income created by the business process.
The solvency of an enterprise includes short-term solvency and long-term solvency.
1, short-term solvency analysis
Short-term solvency refers to the degree of assurance that an enterprise can repay its current liabilities in full and on time with its current assets, that is, its ability to repay its current liabilities with its current assets reflects its ability to pay its daily debts due, and is an important indicator to measure its current financial ability, especially its liquidity. The short-term solvency of enterprises mainly includes current ratio, quick ratio and cash current liabilities.
2. Long-term solvency analysis
Long-term solvency refers to the ability of enterprises to repay long-term liabilities, including long-term loans, bonds payable, long-term payables, professional payables and estimated liabilities.