{"id":85,"date":"2025-05-09T14:04:58","date_gmt":"2025-05-09T11:04:58","guid":{"rendered":"http:\/\/wpcalc.com\/?p=85"},"modified":"2026-09-30T20:09:31","modified_gmt":"2026-09-30T17:09:31","slug":"solvency-ratio","status":"publish","type":"post","link":"https:\/\/wpcalc.com\/en\/finance\/solvency-ratio\/","title":{"rendered":"Solvency Ratio Calculator"},"content":{"rendered":"<section class=\"not-prose calculator-box\" aria-labelledby=\"calculator-title\"><div class=\"flex items-baseline sm:items-center justify-between gap-2 sm:gap-3\"><div class=\"flex flex-col sm:flex-row sm:items-center gap-2\"><span class=\"icon icon-calculator text-primary-700! text-base! dark:text-primary-300!\" aria-hidden=\"true\"><\/span><h2 id=\"calculator-title\" class=\"text-lg font-display font-bold\">Long-Term Solvency Ratio Tool<\/h2><\/div><div class=\"calcdash-favorite group\">\n  <button type=\"button\" class=\"favorite\" id=\"favorite\" data-favorite-id=\"85\" data-favorite-title=\"Solvency Ratio\" data-favorite-url=\"https:\/\/wpcalc.com\/en\/finance\/solvency-ratio\/\" data-favorite-excerpt=\"Calculate the solvency ratio from net income, depreciation, and total liabilities to see how well a company can cover its long-term obligations. Enter your figures to get an instant percentage with an interpretation.\" aria-label=\"Add to Favorites\" data-favorite-icon=\"icon icon-inventory\">\n    <span class=\"icon icon-shape-star-empty\" aria-hidden=\"true\"><\/span>\n  <\/button>\n  <div class=\"calcdash-favorite__tip\" aria-hidden=\"true\">\n   <span class=\"favorite-tooltip\" id=\"favorite-tooltip\"><\/span>\n  <\/div>\n  <span class=\"sr-only\" role=\"status\" id=\"favorite-status\"><\/span>\n<\/div><\/div><form action=\"https:\/\/wpcalc.com\/en\/finance\/solvency-ratio\/\" method=\"POST\" class=\"calculator\" id=\"calculator-85\" data-post=\"85\"><fieldset class=\"fieldset-input\"><legend class=\"sr-only\">Input Fields<\/legend><div class=\"field has-term\" id=\"input-1\"><label for=\"field-1\">Net income<\/label><div class=\"term\">NI<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"net_income\" id=\"field-1\" aria-describedby=\"calc-unit-1 calc-info-1\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"100000\"\/><div class=\"unit\" id=\"calc-unit-1\">$<\/div><small id=\"calc-info-1\">Net profit after taxes<\/small><\/div><div class=\"field has-term\" id=\"input-2\"><label for=\"field-2\">Depreciation<\/label><div class=\"term\">D<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"depreciation\" id=\"field-2\" aria-describedby=\"calc-unit-2 calc-info-2\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0\" value=\"20000\"\/><div class=\"unit\" id=\"calc-unit-2\">$<\/div><small id=\"calc-info-2\">Annual depreciation expense<\/small><\/div><div class=\"field has-term\" id=\"input-3\"><label for=\"field-3\">Total liabilities<\/label><div class=\"term\">L<\/div>  <div class=\"absolute bottom-0 left-16 top-8 w-2 h-0.5 bg-blue-500\"><\/div><input type=\"text\" name=\"total_liabilities\" id=\"field-3\" aria-describedby=\"calc-unit-3 calc-info-3\" data-number inputmode=\"decimal\" autocomplete=\"off\" spellcheck=\"false\" min=\"0.01\" value=\"400000\"\/><div class=\"unit\" id=\"calc-unit-3\">$<\/div><small id=\"calc-info-3\">All financial obligations owed by the company<\/small><\/div><\/fieldset><div class=\"buttons\"><button type=\"submit\" data-text=\"Re-Calculate\" id=\"calculate-button\" data-post=\"85\">Calculate<\/button><button type=\"reset\">Reset<\/button><\/div><div class=\"field is-checkbox hidden!\" id=\"field-auto-calc\"><input type=\"checkbox\" id=\"auto-calc\"><label for=\"auto-calc\">Calculate automatically<\/label><small>If enabled, the result will update automatically when you change any value.<\/small><\/div><div class=\"fieldset-result is-hidden\" aria-labelledby=\"result-title\" aria-live=\"polite\" role=\"region\"> <h3 class=\"result-title bg-gradient-to-r from-primary-50 to-gray-50 dark:from-primary-900 dark:to-gray-800\" id=\"result-title\"><span class=\"icon icon-s-pulse\" aria-hidden=\"true\"><\/span> Your Results<\/h3><div class=\"result-box\"><div class=\"field-result\" id=\"output-1\"><span class=\"field-title\"><span>Solvency Ratio<\/span><\/span><span class=\"field-value\" id=\"result-1\" data-unit=\"%\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><div class=\"field-result is-column\" id=\"output-2\"><span class=\"field-title\"><span>Interpretation<\/span><\/span><span class=\"field-value\" id=\"result-2\"><\/span><button type=\"button\" class=\"copy-result\" data-tooltip=\"Copy Result\" aria-label=\"Copy Result\"><span class=\"copy-icon icon icon-document-copy\" aria-hidden=\"true\"><\/span><\/button><\/div><\/div><div class=\"result-actions\"><button type=\"button\" class=\"copy-link\"><svg viewBox=\"0 0 20 20\" fill=\"currentColor\" aria-hidden=\"true\"><path d=\"M12.232 4.232a2.5 2.5 0 0 1 3.536 3.536l-1.225 1.224a.75.75 0 0 0 1.061 1.06l1.224-1.224a4 4 0 0 0-5.656-5.656l-3 3a4 4 0 0 0 .225 5.865.75.75 0 0 0 .977-1.138 2.5 2.5 0 0 1-.142-3.667l3-3Z\"\/><path d=\"M11.603 7.963a.75.75 0 0 0-.977 1.138 2.5 2.5 0 0 1 .142 3.667l-3 3a2.5 2.5 0 0 1-3.536-3.536l1.225-1.224a.75.75 0 0 0-1.061-1.06l-1.224 1.224a4 4 0 1 0 5.656 5.656l3-3a4 4 0 0 0-.225-5.865Z\"\/><\/svg><span class=\"copy-link__text\">Copy link to this calculation<\/span><\/button><span class=\"sr-only\" role=\"status\" id=\"copy-link-status\"><\/span><\/div><\/div><a href=\"#respond\" class=\"hidden transition-opacity duration-300 opacity-0 w-50 text-sm justify-center items-center gap-2 px-4 py-2 rounded bg-gray-200 text-gray-700 hover:bg-gray-300\" id=\"leave-comment\"><span class=\"icon icon-comments\" aria-hidden=\"true\"><\/span>Leave a Comment<\/a><\/form><\/section><section id=\"calc-reactions\" class=\"not-prose hidden my-12 bg-gradient-to-r from-primary-50 to-gray-50 border border-indigo-100 rounded-xl px-6 py-4 shadow-sm\" data-post=\"85\" aria-live=\"polite\" aria-labelledby=\"calc-reactions-title\"><p id=\"calc-reactions-title\" class=\"text-sm text-gray-500 text-center mb-2\">How did this result make you feel?<\/p><div role=\"group\" aria-labelledby=\"calc-reactions-title\" class=\"grid grid-cols-3 sm:flex sm:flex-row sm:justify-around gap-4 sm:items-center sm:flex-wrap\"><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"like\"><span class=\"reaction-count\" data-reaction-count=\"like\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude00 <\/span><span class=\"reaction-description font-medium\">Like <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"helpful\"><span class=\"reaction-count\" data-reaction-count=\"helpful\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\udca1 <\/span><span class=\"reaction-description font-medium\">Helpful <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"confused\"><span class=\"reaction-count\" data-reaction-count=\"confused\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude15 <\/span><span class=\"reaction-description font-medium\">Confused <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"disappointed\"><span class=\"reaction-count\" data-reaction-count=\"disappointed\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\ud83d\ude1e <\/span><span class=\"reaction-description font-medium\">Disappointed <\/span><\/button><button type=\"button\" aria-pressed=\"false\" class=\"reaction-btn flex flex-col items-center gap-1 text-sm text-gray-700 hover:text-primary-600 cursor-pointer transition-transform hover:scale-105\" data-reaction=\"inaccurate\"><span class=\"reaction-count\" data-reaction-count=\"inaccurate\">0<\/span><span class=\"reaction text-3xl\" aria-hidden=\"true\">\u274c <\/span><span class=\"reaction-description font-medium\">Inaccurate <\/span><\/button><\/div><div id=\"reaction-message\" class=\"hidden mt-8 rounded-md border border-primary-100 bg-white\/50 backdrop-blur-sm px-4 py-2 text-sm text-center shadow-sm\"><\/div><\/section><div class=\"calcdash-ad not-prose calcdash-ad--calc_result calcdash-ad--in-article\"><ins class=\"adsbygoogle\" style=\"display:block\" data-ad-client=\"ca-pub-1721569815777345\" data-ad-slot=\"6317458308\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\"><\/ins><script>(adsbygoogle = window.adsbygoogle || []).push({});<\/script><\/div>\n<style id=\"wpcoderpro-inline-1\">.formula-box {\r\n\tborder-bottom: none !important;\r\n}<\/style><section class=\"formula-box\" aria-labelledby=\"formula-title\">\r\n\t<div id=\"formula-title\" class=\"not-prose font-display mb-4\"><span class=\"icon icon-formula\" aria-hidden=\"true\"><\/span><h2>Solvency Ratio Formula<\/h2><\/div>\r\n\t<figure class=\"not-prose formula\">\r\n\t\t<figcaption class=\"formula-title\">Formula<\/figcaption>\r\n\t\t<div class=\"text-base text-gray-800\" id=\"formula\">\n\\[ \\text{Solvency Ratio} = \\left( \\frac{\\text{Net Income} + \\text{Depreciation}}{\\text{Total Liabilities}} \\right) \\times 100 \\]\n<\/div>\r\n\t<\/figure>\r\n\t<\/p>\n<p><strong>Where:<\/strong><\/p>\n<ul>\n<li>\\( \\text{Net Income} \\) \u2014 net profit after taxes, in dollars<\/li>\n<li>\\( \\text{Depreciation} \\) \u2014 annual depreciation expense, a non-cash charge added back to income<\/li>\n<li>\\( \\text{Total Liabilities} \\) \u2014 all financial obligations owed by the company, both short-term and long-term<\/li>\n<\/ul>\n<p>This version of the solvency ratio measures how many cents of internally generated cash (net income plus depreciation) are available for every dollar of liabilities, expressed as a percentage. A higher percentage indicates stronger long-term financial health.<\/p>\n<p>\r\n<\/section>\n<style id=\"wpcoderpro-inline-459\">.calculation-box {\r\n\tborder-bottom: none !important;\r\n}<\/style><section id=\"calculation\" class=\"calculation-box\" aria-labelledby=\"calculation-title\">\r\n\t<div id=\"calculation-title\" class=\"not-prose font-display\"><span class=\"icon icon-unordered-list\" aria-hidden=\"true\"><\/span><h2>Solvency Ratio \u2013 Calculation Example<\/h2><\/div>\r\n\r\n<\/p>\n<p><strong>Example:<\/strong> a company reports net income of $100,000, annual depreciation of $20,000, and total liabilities of $400,000.<\/p>\n<p>\\[ \\text{Solvency Ratio} = \\left( \\frac{100{,}000 + 20{,}000}{400{,}000} \\right) \\times 100 = \\left( \\frac{120{,}000}{400{,}000} \\right) \\times 100 = 30\\% \\]<\/p>\n<p><strong>Result:<\/strong> the solvency ratio is <strong>30%<\/strong>, which indicates strong solvency \u2014 the company's cash earnings cover its liabilities comfortably and its long-term financial position is stable.<\/p>\n<p>\n\r\n<\/section>\n<h2>How to Use the Calculator<\/h2>\n<ol>\n<li>Enter the company's <strong>Net income<\/strong> \u2014 its net profit after taxes for the period.<\/li>\n<li>Enter the annual <strong>Depreciation<\/strong> expense reported in the income statement.<\/li>\n<li>Enter <strong>Total liabilities<\/strong> \u2014 the sum of all obligations shown on the balance sheet.<\/li>\n<li>Read the <strong>Solvency Ratio<\/strong> in percent, along with the automatic interpretation (strong, moderate, or weak).<\/li>\n<\/ol>\n<h2>What Is the Solvency Ratio?<\/h2>\n<p>The solvency ratio is a key measure of long-term financial stability. It answers a simple question: can a company generate enough cash from its operations to eventually repay everything it owes? Unlike <a href=\"https:\/\/wpcalc.com\/en\/finance\/acid-test-ratio\/\">liquidity ratios<\/a>, which focus on paying bills over the next weeks or months, the solvency ratio looks at the company's ability to survive and meet its obligations over a period of years.<\/p>\n<p>The formula adds depreciation back to net income because depreciation is a non-cash expense \u2014 it reduces reported profit but does not actually drain money from the business. This makes net income plus depreciation a rough proxy for the cash the company generates internally, which is the pool of funds available to service and pay down debt.<\/p>\n<p>As a rule of thumb, a ratio of <strong>20% or higher<\/strong> is generally considered strong, <strong>10\u201320%<\/strong> is moderate, and <strong>below 10%<\/strong> signals weak solvency and potential long-term financial risk. However, acceptable levels vary by industry: capital-intensive sectors with stable cash flows can sustain more debt than volatile ones, so the ratio is most meaningful when compared with competitors or the company's own history.<\/p>\n<p>Investors, creditors, and analysts use the solvency ratio for credit risk analysis, debt repayment evaluation, and investment decisions. Lenders often review it before issuing long-term loans, since a low ratio suggests the borrower may struggle to cover its obligations from operating earnings. Note that this ratio is the inverse perspective of the <a href=\"https:\/\/wpcalc.com\/en\/finance\/insolvency-ratio\/\">insolvency ratio<\/a>, which expresses liabilities relative to equity.<\/p>\n<h2>Limitations and Practical Tips<\/h2>\n<ul>\n<li><strong>It is a snapshot.<\/strong> The ratio uses figures from a single period. A one-time gain, loss, or restructuring charge can distort it \u2014 check the trend over several years before drawing conclusions.<\/li>\n<li><strong>Depreciation is a simplification.<\/strong> Adding back depreciation approximates operating cash flow but ignores other non-cash items, working capital changes, and required capital expenditures.<\/li>\n<li><strong>Compare within the industry.<\/strong> A 15% ratio may be healthy for a utility but alarming for a startup. Benchmark against peers and sector averages.<\/li>\n<li><strong>Use it alongside other metrics.<\/strong> For a fuller picture, pair it with measures such as <a href=\"https:\/\/wpcalc.com\/en\/finance\/return-on-capital-employed\/\">return on capital employed<\/a> or the <a href=\"https:\/\/wpcalc.com\/en\/finance\/acid-test-ratio\/\">acid test ratio<\/a>, which cover profitability and short-term liquidity respectively.<\/li>\n<li><strong>Watch the liability definition.<\/strong> Make sure the figure you enter includes all current and long-term liabilities, not just long-term debt, so the result matches this formula's intent.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Calculate the solvency ratio from net income, depreciation, and total liabilities to see how well a company can cover its long-term obligations. Enter your figures to get an instant percentage with an interpretation.<\/p>\n","protected":false},"author":70,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[26],"class_list":["post-85","post","type-post","status-publish","format-standard","hentry","category-finance","tag-inventory"],"acf":[],"_links":{"self":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/85","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/users\/70"}],"replies":[{"embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/comments?post=85"}],"version-history":[{"count":3,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/85\/revisions"}],"predecessor-version":[{"id":66182,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/posts\/85\/revisions\/66182"}],"wp:attachment":[{"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/media?parent=85"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/categories?post=85"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wpcalc.com\/en\/wp-json\/wp\/v2\/tags?post=85"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}