solvency

Vocabulary Word

Definition

'Solvency' is financial lingo that essentially means a company can pay its debts. Think of it like having enough cash in your bank account to pay the bills and still have money left over.

Examples in Different Contexts

In corporate finance, maintaining 'solvency' is paramount to ensure sustainable business operations and growth. A CFO might state, 'Strategically managing our assets and liabilities is critical to maintaining solvency and building shareholder confidence.'

Practice Scenarios

Business

Scenario:

Given the current market conditions, we should be vigilant not to jeopardize our long-term financial health.

Response:

Given our reliable solvency ratio, we are well-placed to handle any unforeseen financial challenges.

Accounting

Scenario:

Considering the unfavorable economic indications, we need to revisit our financial strategy and commitments.

Response:

The solvency analysis provides accurate insight into our financial stability. It will guide our approach to addressing long-term obligations.