Solvency
Glossary version 2026-07-12.v1 · reviewed July 12, 2026
A company’s ability to meet its debts and other long-term obligations. Solvency risk rises when debt and fixed payments become too large for the cash the business can generate.
Solvency describes whether a company can meet its debts and other long-term obligations. It is different from a temporary earnings slowdown: a profitable company may have weak solvency if debt payments are too large, while a loss-making company with substantial cash may remain solvent for years. Analysts assess solvency with net debt, interest coverage, debt maturities, liquidity, and the durability of operating cash flow. A bear case should mention solvency only when those balance-sheet facts show a genuine risk that the company may struggle to pay what it owes.