Solvency

A measurement of the amount of borrowed capital (or debt), leasing commitments, and other obligations used by a business relative to the amount of owner equity in the business. Debt capital is interest bearing and/or has a date by which it must be paid. Therefore, solvency measures provide (a) an indication of the firm's ability to repay all financial obligations if all assets were sold (for the prices indicated) and (b) an indication of the ability to continue operations as a viable business after a financial adversity (such as drought), which typically results in increased debt or reduced equity. (II-5, 45; III-1, 4, 8-10; IV-4-6)

Authorization Path: 2.2.5.2.43.1