Solvency Ratio

The solvency ratio is a measure of a company’s ability to meet its debt obligations on time. It is calculated by dividing current liabilities by current assets. A solvency ratio of 1 means that the company is able to pay off its current liabilities in full. A solvency ratio greater than 1 means that the company has more current assets than current liabilities, and a solvency ratio less than 1 means that the company has more current liabilities than current assets.