What is solvability?

A company’s solvency is its ability to meet its commitments and obligations, i.e., pay its employees, suppliers, taxes, repay its loans and debt service, and more generally, repay all its debts. There are two types of solvency: short-term solvency, referred to as liquidity, i.e., its ability to meet its day-to-day commitments, and long-term solvency, i.e., its ability to meet its commitments structurally. Financial analysis offers numerous tools for diagnosing this problem, implementing remediation decisions, and avoiding bankruptcy.