Solvency Ratio Calculator
This calculator measures the solvency ratio, which indicates a company's ability to meet its long-term obligations. It's a critical metric used by investors, creditors, and financial analysts to assess financial stability and creditworthiness.
Long-Term Solvency Ratio Tool
Solvency Ratio Formula
Explanation:
This version of the solvency ratio evaluates how much of a company’s long-term liabilities can be covered by its income and non-cash expenses. A higher percentage indicates better financial health.
Solvency ratio is a key long-term metric that reflects the company’s ability to survive over time. It complements liquidity ratios and is essential for:
- Credit risk analysis
- Debt repayment evaluation
- Investment decision-making
Example Variables:
- Net Income: $150,000
- Depreciation: $50,000
- Total Liabilities: $500,000
- Solvency Ratio = ((150,000 + 50,000) / 500,000) × 100 = 40%
Use Cases:
- Evaluating creditworthiness
- Financial audits and due diligence
- Long-term strategic planning