Solvency

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Solvency

Ability to meet obligations.

Solvency

The state of a company being able to service its debt and meet its other obligations, especially in the long-term. Solvency is a necessary condition for a business to operate. If a company is unable to meet its obligation, it is said to be insolvent and must undergo bankruptcy in order to either liquidate or restructure. See also: Insolvency risk, Accounting insolvency.