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Solvency

UK //ˈsɒlvənsi// US //ˈsɑlvənsi// Pronunciation

Definition

The ability of a company or individual to meet their long-term financial commitments.

Listen to definition

In simple words: The ability to pay debts.

Examples

• The company's solvency was questioned after the unexpected loss in sales.
• Maintaining solvency is crucial for any business to survive economic downturns.
• Investors often assess a firm's solvency before making investment decisions.
• A good credit score is an indicator of solvency for personal finance.
• The audit's findings confirmed the company's continued solvency and viability.

Usage notes

Used mainly in financial or legal contexts. Not common in everyday conversation. Best suited for professional settings.

Grammar pattern

standalone noun

Memory hint

Think of 'solve' and 'c' for cash – it means you can solve your cash issues.

Collocations

• assess solvency
• improve solvency
• indicators of solvency

Synonyms

• financial stability
• creditworthiness
• liquidity
• fiscal soundness

Common mistakes

• Confused with 'solvent' - 'solvency' is a noun, while 'solvent' can be an adjective.
• May use incorrectly in casual contexts where 'financial health' is more appropriate.
• Misunderstanding the concept - associates solvency only with profits instead of debts.