Solvency

Solvency refers to the ability of an individual or organization to meet its long-term financial obligations. In other words, it assesses whether the assets of an entity exceed its liabilities, enabling it to continue operating over the long term. There are two main aspects of solvency: 1. **Balance Sheet Solvency:** This is determined by comparing total assets to total liabilities. If the total assets are greater than total liabilities, the entity is considered solvent.