Solvency is refers to the enterprise ability to repay all debt. The solvency of current liabilities reaction of enterprises is the short-term solvency; solvency of non current liabilities of enterprises is the ability of the reaction of long-term solvency.
the short-term debt paying ability generally known as the ability of payment. Mainly through the liquidation of assets, to repay short-term debt maturity. There are important effects of short-term debt paying ability of enterprise production and business activities and financial status, a while have good operation ability and strong profitability, but once the short-term debt paying ability is not strong, because of the difficulties in the capital turnover will affect the enterprise normal business production.Indicators of short-term debt paying ability mainly includes: the current ratio and quick ratio.
long-term debt paying ability is refers to the enterprise with its assets or services to pay for long-term debt capacity. The main financial ratios and evaluate the enterprise's long-term debt paying ability has the rate of assets and liabilities and equity ratio. The main factors influencing the long-term solvency of enterprises are: the profitability of enterprises; the effect of investment; investment growth and stability degree; the real value of equity funds; cash flow of enterprise management.
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