Solvency
The ability to meet long-term financial obligations.
A business can be liquid this week and insolvent over the horizon, or profitable on paper and short of cash on Friday. The two ideas answer different questions.
Often confused with
- Liquidity
- Solvency asks whether the long-run obligations can be met; liquidity asks whether cash is available now.
Taught in
See also
3.7.B.2 · 3.7.B.3