solvency

noun

sol·ven·cy | \ ˈsäl-vən(t)-sē

, ˈsȯl-\

Definition of solvency

: the quality or state of being solvent

Examples of solvency in a Sentence

They reviewed financial records to measure the borrower's solvency.

Recent Examples on the Web

The work group created to come up with a plan for restoring the BSO to solvency held its first meeting Aug. 23 but had difficulty in agreeing on a path forward — largely because of the unresolved nature of the labor dispute. — Baltimore Sun Staff, baltimoresun.com, "Bargaining session between Baltimore Symphony Orchestra, musicians ends without an agreement," 10 Sep. 2019 Why shouldn’t all the other banks hold their own gold, and take care of their own solvency? — John Lanchester, The New Yorker, "The Invention of Money," 29 July 2019 Hunter is the sort of dynamic defender who could push the young Hawks toward solvency—switchable and flexible in ways sorely needed. — Rob Mahoney, SI.com, "Trade Grades: An Extension of the AD Deal, Pelicans-Hawks Swap Shapes Two Futures," 21 June 2019 Cushman noted the state Supreme Court just upheld a ruling allowing neighboring Cranston to suspend the cost-of-living increases of police and firefighter retirees for a decade to maintain the city retirement fund’s solvency. — Edward Fitzpatrick, BostonGlobe.com, "Once a desirable middle class destination, Warwick now faces financial stress," 13 June 2019 The warriors mounted a protracted campaign against the bakery’s reputation and solvency. — George Will, Twin Cities, "George Will: Oberlin has graduated from self-caricature to disgrace," 20 June 2019 The warriors mounted a protracted campaign against the bakery’s reputation and solvency. — George Will, National Review, "Oberlin Has Graduated from Self-Caricature to Disgrace," 20 June 2019 So the money could go, for example, toward health benefits or pensions, commitments that the district must fund from somewhere and that threaten the long-term solvency of the school system. — Howard Blume, latimes.com, "Parcel tax for L.A. schools is latest ask of taxpayers," 4 June 2019 There's something about getting your name on a ballot and going around talking about social security or Medicare solvency or real issues of national security and national defense every day that makes things serious, and not just theoretical. — Hilary Cadigan, Bon Appétit, "Lauren Underwood Is Doing Her 30s Better Than Just About Anyone We Know," 12 June 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'solvency.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

13 Sep 2019

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The first known use of solvency was circa 1727

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More Definitions for solvency

solvency

noun

Financial Definition of solvency

What It Is

Solvency is a company’s ability to pay its debts as they become due.

How It Works

Solvency measures a company's ability to meet its financial obligations.
Short-term solvency is often measured by the current ratio, which is calculated by dividing current assets by current liabilities.

Longer-term solvency is evaluated using the solvency ratio, which divides the company’s net worth by its total assets.

A business can be insolvent but still profitable. For example, a company may borrow money to expand its operations and be unable to immediately repay its debt from existing assets. In this instance, the lender assumes cash flows will increase because of the business expansion and enable the company to comfortably meet payment obligations in the future.

Why It Matters

A company's solvency determines its ability to service debts and achieve long-term growth and profitability. A business that is completely insolvent is unable to pay its debts and will be forced into bankruptcy. Investors should examine all the financial statements of a company to make certain the business is solvent as well as profitable.

Source: Investing Answers

solvency

noun