Solvency Test

The Solvency Test is a financial assessment used by companies and insurance firms to ensure they have enough assets to cover their liabilities and ongoing obligations. It evaluates whether the organization’s assets are sufficient for its long-term health, rather than just short-term profit. Essentially, it checks if the company can comfortably meet its debts and commitments, even in adverse situations. This test helps regulators, investors, and the company itself gauge financial stability, ensuring the company remains solvent and trustworthy over time.