Solvency

Solvency

Summary of Solvency

The capacity to pay one's debts. There are two states of solvency: actual solvency (the firm's total assets would exceed total liabilities upon liquidation) and technical solvency (the ability to pay current debts as they come due). It is possible, therefore, for a firm to be actually solvent but not technically solvent, and viceversa.

(Main Author: William J. Miller)


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