• The solvency ratio examines the firm’s ability to repay its long-term debts and obligations.
  • Key solvency ratios include debt-to-asset ratio, interest coverage ratio, equity ratio and debt-to-equity ratio (D/E).
  • Solvency ratios are often used by potential creditors when assessing a company’s creditworthiness, as well as by potential bond investors.
  • Solvency ratios and liquidity ratios measure a company’s financial health, but solvency ratios have a longer-term perspective than liquidity ratios.