Solvency
From Wikipedia, the free encyclopedia
This article is about financial solvency. For the policy debate term, see Solvency (policy debate).
Solvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity.[1] Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term expansion and growth.[2] This is best measured using the net liquid balance (NLB) formula. In this formula solvency is calculated by adding cash and cash equivalents to short-term investments, then subtracting notes payable.[3]
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A solid principal of solvency involves ploughing back a good portion of their profits into the business to enhance reserves and financial strength.
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[edit] References
- Gaist, Paul A (2009). Igniting the Power of Community: The Role of CBOs and NGOs in Global Public Health. Springer. ISBN 038798156X. OCLC 310400989.
- Zietlow, John T; Seidner, Alan G (2007). Cash & investment management for nonprofit organizations. John Wiley and Sons. ISBN 0471741655. OCLC 255472451.
