Solvency Ratio

Solvency Ratio

A measure of a company's ability to service debts, expressed as a percentage. It is calculating by adding the company's post-tax net profit and depreciation, and dividing the sum by the quantity of long-term and short-term liabilities; the resulting amount is expressed as a percentage. A high solvency ratio indicates a healthy company, while a low ratio indicates the opposite. A low solvency ratio further indicates likelihood of default. Different industries have different standards as to what qualifies as an acceptable solvency ratio, but, in general, a ratio of 20% or higher is considered healthy. Potential lenders may take the solvency ratio into account when considering making further loans.
References in periodicals archive ?
To determine performance, each company's return on assets, profit margin, solvency ratio and price to earnings ratio are looked at and rankings are assigned accordingly.
The China Insurance Regulatory Commission requires insurers to maintain an adequate solvency level with a solvency ratio of not less than 100%.
This implies that insurers can choose either the DNB swap curve or the ECB AAA curve, the latter being the curve Aegon used for the calculation of the IGD (Insurance Group Directive) solvency ratio for Aegon the Netherlands.
Although the Solvency II regime has yet to be finalised, Moody's Investor Service has outlined its expectation that solvency ratios will ultimately exhibit a more complex volatility under Solvency II than under Solvency I, as both the available capital and the capital requirements of the solvency ratio will change with market conditions.
The conversion will ensure that NLB's Core Tier 1 capital solvency ratio will reach 8.
Credit Agricole reiterated its target for a common equity Tier 1 solvency ratio above 10%, under Basel III standards, by the end of 2013.
Delta Lloyd expects its IGD solvency ratio at end of September 2011 to be within the target range of 160-175 per cent, excluding the expected 12 per cent uplift from the sale of the German activities mentioned above.
Financial Stability didn't say by how much the FSA required Max Bank to increase writedowns or what the new solvency ratio requirement was.
Summary: Lebanon's banking sector may up its solvency ratio to 10 percent within the next four years, in a bid to meet Basel III standards, Central Bank Governor Riad Salameh said Tuesday.
After inclusion of the profit related to the first six months of 2010, the solvency ratio of the Saxo Bank Group was 19.
The company's return on equity rose 38 per cent as at December 31, 2008, while the solvency ratio jumped 135 per cent.
Over the same period, the average solvency ratio of public DB plans increased from 87 percent to 89 percent.