Solvency, in
finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
or business, is the degree to which the
current assets of an individual or entity exceed the
current liabilities
In accounting, current liabilities are often understood as all liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle of a given firm, whichever period is longer.
A more complete definition is t ...
of that individual or entity.
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.
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.
There exist
cryptographic
Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or '' -logia'', "study", respectively), is the practice and study of techniques for secure communication in the presence of adve ...
schemes for both
proofs of liabilities and
assets
In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...
, especially in the
blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, a ...
space.
See also
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Accounting liquidity
In accounting, liquidity (or accounting liquidity) is a measure of the ability of a debtor to pay their debts as and when they fall due. It is usually expressed as a ratio
In mathematics, a ratio shows how many times one number contains an ...
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Debt ratio
Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt ( short-term and long-term liabilities) and total assets (the sum of current assets, fixed assets, and oth ...
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Going concern
A going concern is a business that is assumed will meet its financial obligations when they become due. It functions without the threat of liquidation for the foreseeable future, which is usually regarded as at least the next 12 months or the spec ...
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Insolvency
In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet i ...
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Quick ratio
In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which measures the ability of a company to use its ''near cash'' or quick assets to extinguish or retire its current liabilities immediately. It is defi ...
Notes
References
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External links
*{{Wiktionary-inline
Financial economics