Solvency

Definition

  • The ability of a business or individual to meet its financial liabilities in the long or short term. Insolvency, as opposed to solvency, is when an entity lacks the liquidity required to operate, which generally leads to bankruptcy.

Synonyms
financial insolvency, insolvency, financial solvency

Related Terms and Acronyms

  • Acid-Test Ratio Definition,
    • A ratio that determines the liquidity of a company without requiring the company to sell assets or inventory.
  • Asset Definition,
    • Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others including bank accounts, stocks, mutual funds, and so on.
  • Bankruptcy (BK) Acronym, Important,
    • A court action under the Federal Bankruptcy Code by which a debtor's debts may be discharged, usually by transferring assets to a trustee, or rescheduled.
  • Debt Definition,
    • Money one person or firm owes to another person or firm.
  • Debt Consolidation Definition,
    • The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. It's also called a consolidation loan. CanEquity has access to Canada's best debt consolidation products, for more info about debt consolidation see our debt consolidation page.
  • Expense Definition,
    • Costs incurred through a business's operations.
  • Holding Period Definition,
    • The length of time a capital asset is owned. Assets held 12 months or less are short-term; those owned more than 12 months are long-term properties.
  • Illiquid Asset Definition,
    • An asset that cannot be sold easily or in a timely manner for its full value.
  • Liabilities Definition,
    • A borrower's debts and legal obligations.
  • Liquid Assets Definition,
    • Cash and other property that can be converted quickly and easily into cash.
  • Liquidation Definition,
    • To convert into cash.
    • The practice of selling or redistributing some or all of a business's assets in order to repay debts or pay investors if the business becomes insolvent or is sold in full or in part.
    • To settle the outstanding debts by selling property.
  • Liquidity Definition,
    • The ability to convert assets to cash quickly, without significant losses.
  • Long-term Liabilities Definition,
    • Money owed over a period longer than 12 months, such as mortgages, bank loans, and other obligations.
  • Loss Definition,
    • When expenses are larger than revenues.
  • Net Operating Loss (NOL) Acronym, Very Important,
    • A net loss for the tax year because of business or casualty losses. Taxpayers may use an excess loss of one year as a deduction for certain past or future years.
  • Non-dischargeable Debt Definition,
    • Debt that cannot be eliminated in bankruptcy such as Federal taxes.
  • Operating Cash Flow (OCF) Acronym,
    • The money a company generates from its business operations. This revenue excludes costs from certain investments.
  • Operating Loan Definition,
    • A loan intended for short-term financing, supplying cash flow support or to cover day-to-day operating expenses.
  • Other Income/Expenses Definition,
    • Any income or expenses earned or disbursed by a business that are not clearly associated to its core operations.
  • Profit Definition,
    • When revenues exceed expenses.
  • Protected Cell Company (SPC) Acronym,
    • A company that separates its assets and liabilities into a number of 'cells' to shield itself and each 'cell' from losses.
  • Receivership Definition,
    • A form of bankruptcy where a person is appointed to take control of a company and is responsible for recouping unpaid debts.
  • Revenue Definition,
    • Money earned by a company from its business activities.
  • Short-term Liabilities Definition,
    • Money that you have to pay in less than 12 months, including wages, short-term loans, taxes, credit card balances and long-term loans.
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