Solvency Ratio

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Dictionary Says

Definition of 'Solvency Ratio'

One of many ratios used to measure a company's ability to meet long-term obligations. The solvency ratio measures the size of a company's after-tax income, excluding non-cash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations.

The measure is usually calculated as follows:

Solvency Ratio
Investopedia Says

Investopedia explains 'Solvency Ratio'

Acceptable solvency ratios will vary from industry to industry, but as a general rule of thumb, a solvency ratio of greater than 20% is considered financially healthy. Generally speaking, the lower a company's solvency ratio, the greater the probability that the company will default on its debt obligations.
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'Solvency Ratio'

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    ... in the manner in which Tier 1 metrics are obtained, the ratio itself is important
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    ... of its solvency, is arguably one of the most important factors in the return to
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    ... read Move Over P/E, Make Way For The PEG and How The PEG Ratio Can Help ... He fought
    his way back to solvency through private investing and launched a career as a ...

  • Get Organized With An Investment Analysis Form

    http://www.investopedia.com/articles/basics/06/analysisform.asp
    ... be expected in any situation where fairly abstract ideas, like solvency ratios and ...
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    ... Cycle; 13.9 Life Cycle Analysis: The Industry Life Cycle; 13.10 The Concentration
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  • How To Make Social Security Work - Investopedia.com

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    ... The worker per retiree ratio has also changed significantly, and is expected to ... in
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    ... There is no established regulatory ratio for tangible common equity. ... Conclusion As
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