Solvency Ratio

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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 ?
The decision to revoke the licences was prompted by the respective breaches in the ICJ's minimum solvency ratios.
Two of the best types of ratios to consider are liquidity and solvency ratios.
MC), Spain's second largest bank, has said that it was looking for a 'more prudent' dividend policy in 2009, which would help in strengthening its solvency ratios without a capital hike.
The local solvency ratios slightly decreased from 222% in fiscal year 2007 to 193% in fiscal year 2008.
BANKINTER's strong solvency ratios will not be significantly affected by the transaction.
Aruba's external solvency ratios compare favorably with the 'BBB' median.
BANKINTER's strong solvency ratios would not be significantly affected by the transaction.
Brazil's investment grade rating is supported by the significant improvement in Brazil's external and public sector solvency ratios which has diminished the vulnerability of the country to external and exchanged rate shocks.
The Bank enjoys strong solvency ratios, with total capital as measured by the standards of the Bank of International Settlements (B.
These credit strengths, though, are balanced by comparatively high fiscal and external solvency ratios.
The Bank enjoys strong solvency ratios, with total capital exceeding 21 percent as measured by the standards of the Bank of International Settlements (B.
Nevertheless, relatively high fiscal and external solvency ratios, the exposure of public debt to currency risk, and relatively low external liquidity remain as credit weaknesses.