Solvency is the ability of a company to pay the entire debt obligations either short term or long term debt in case the company dissolved. If the company is unable to pay off her debts when the whole dissolved, then it says that the company. But when the company was unable to pay off her debts the rest either short term or long term if liquidated.
Solvency Ratio
The balance sheet of the company concerned and the calculation of the solvency at the level of using the ratio of two kinds, namely:
Total Assets
Solvency =-----------------x 100%
Total debt
The total assets of a company is the sum of all assets owned by the company, which is present on the debit side of a balance sheet or on the top of a debit. It should be noted, that in in the method, not taken into account these assets assets are in material (not real), whereas total deb in a company are a number of corporate debt, both short term debt as well as long term debt with the formula below:
Net worth
Net Worth to debt ratio =----------------x 100%
Total debt
Net worth is the number of private equity-owned companies that covers capital, shares, reserves, surplus and others. Other net worth is the difference between the amount of debt the company reduced by total assets. While net worth to debt ratio is normal is 100% which means that the amount of debt in the same amount of its own capital.
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