Construct · 1 fields · 1 citations

solvent: a standalone construct

One name. One construct. A landmark on the map.

● anchor · a standalone construct Nearest construct by meaning·not indexed
solvent1 CONSTRUCTSolvencyALTMAN · Z-SCORE

A single standalone construct; nearby constructs are located against it in the Collider. Tap a field for its definition, unit, and measures.

Corporate finance

Able to meet obligations as they fall due

In finance, to be solvent is to be able to meet one's obligations: in balance-sheet terms, to have assets that exceed liabilities, and in cash-flow terms, to be able to pay debts as they come due; insolvency is the failure of that condition and the usual trigger for bankruptcy. Altman's 1968 Financial ratios, discriminant analysis and the prediction of corporate bankruptcy built the Z-score model that forecasts insolvency from a handful of accounting ratios. The referent is the financial capacity of a firm or person to satisfy claims against them, and it is an entirely different thing from the chemist's solvent, joined to it only through the Latin root solvere, to loosen or discharge.[1]

Unit
The margin by which resources cover obligations, by balance sheet and by cash flow
Recovery means
A firm can return from distress to solvency through restructuring, recapitalisation, or recovered earnings
Measured by
Gauged by leverage and coverage ratios, net asset position, and bankruptcy-prediction scores such as Altman's Z

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Nearby constructs

failure4 fields · 6 citationsjingle · one word, four constructsdistress3 fields · 4 citationsjingle · one word, three constructssolution3 fields · 4 citationsjingle · one word, three constructs

References

  1. Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589–609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x

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