Overall solvency

#05
GUIDING QUESTION

Can it cover all its debts with what it owns?

Overall solvency = long-term structural security.

01.What it is

It shows a company's structural stability: whether it has a solid, self-sufficient base to sustain itself in the long term without depending on continuous refinancing. It shows at a glance whether the business is balanced —with strong assets against its debts— or, on the contrary, overloaded with obligations that compromise its financial security.

02.Component masses

  • Total assets
  • Total liabilities

03.Formula

MAIN FORMULA
Overall solvency: Total assets ÷ Total liabilities

04.Interpretation

  • < 1 → critical.
  • ≈ 1.5–2 → reasonable.
  • > 3 → very safe (perhaps little leverage).

05.Related to

  • Financial autonomy
  • Classic debt ratio
  • Current ratio