Overall solvency
#05GUIDING 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