Solvency, in
finance or business, is the degree to which the
current asset
In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is ...
s of an individual or entity exceed the
current liabilities of that individual or entity.
Solvency can also be described as the ability of a corporation to meet its long-term
fixed expenses and to accomplish long-term expansion and growth.
This is best measured using the net liquid balance (NLB) formula. In this formula, solvency is calculated by adding
cash and cash equivalents
Cash and cash equivalents (CCE) are the most liquid current assets found on a business's balance sheet. Cash equivalents are short-term commitments "with temporarily idle cash and easily convertible into a known cash amount". An investment norma ...
to short-term investments, then subtracting
notes payable.
There exist
cryptographic
Cryptography, or cryptology (from grc, , translit=kryptós "hidden, secret"; and ''graphein'', "to write", or ''-logia'', "study", respectively), is the practice and study of techniques for secure communication in the presence of adver ...
schemes for both
proofs of liabilities and
assets
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...
, especially in the
blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, ...
space.
See also
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Accounting liquidity
In accounting, liquidity (or accounting liquidity) is a measure of the ability of a debtor to pay their debts as and when they fall due. It is usually expressed as a ratio or a percentage of current liabilities. Liquidity is the ability to pay ...
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Debt ratio
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Going concern
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Insolvency
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Quick ratio
In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which measures the ability of a company to use its ''near cash'' or quick assets to extinguish or retire its current liabilities immediately. It is defi ...
Notes
References
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External links
*{{Wiktionary-inline
Financial economics