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Solvency
UK //ˈsɒlvənsi//US //ˈsɑlvənsi//
Definition
The ability of a company or individual to meet their long-term financial commitments.
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.