CMA Part Solvency Analysis | LetsLearn Global
Channel: LetsLearn Global
Date: 2021-06-29

Solvency ratios measure the ability of a company to pay its long-term liabilities, such as debt and the interest on that debt. It's one of many financial ratios that can be used to assess the overall health of a company.


Keep reading for examples of how to calculate solvency ratios, how to use them in your analysis, and how these formulas differ from liquidity ratios.

What Are Solvency Ratios?
Solvency ratios are any form of financial ratio analysis that measures the long-term health of a business. In other words, solvency ratios prove (or disprove) that business firms can honor their debt obligations.


Solvency ratios also help the business owner keep an eye on downtrends that could suggest the potential for bankruptcy in the future. It helps analysts keep a close eye on how much debt a company is taking on in comparison to its assets and earnings.

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