Solvency Analysis

Solvency analysis is a process used to assess whether a company has enough assets to meet its long-term financial obligations. It evaluates the firm's ability to continue operating and pay its debts as they come due. This is typically done by comparing the company’s total assets (what it owns) to its total liabilities (what it owes). A solvent company has more assets than liabilities, indicating it’s financially healthy and capable of fulfilling its commitments. This analysis helps stakeholders, like investors and lenders, understand the company’s stability and long-term viability.