BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Solvency is the ability of a company to meet its long-term financial obligations. When analysts wish to know more about the solvency of a company, they look at the total value of its assets compared to the total liabilities held. An organization is considered solvent when its current assets exceed current liabilities.

Detailed explanation-2: -Solvency is the ability of a company to meet its long-term debts and other financial obligations. Solvency is one measure of a company’s financial health, since it demonstrates a company’s ability to manage operations into the foreseeable future. Investors can use ratios to analyze a company’s solvency.

Detailed explanation-3: -Working capital refers to the excess of current assets over current liabilities. It is the difference between a company’s current assets, like cash, accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, like accounts payable.

Detailed explanation-4: -Insolvency means that the accounting value of the liabilities exceeds the accounting value of the assets (because A = L+ E, if liabilities exceed assets, the equity is actually negative).

Detailed explanation-5: -When a company has more current assets than current liabilities, it has positive working capital. Having enough working capital ensures that a company can fully cover its short-term liabilities as they come due in the next twelve months. This is a sign of a company’s financial strength.