Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 5 - Balance Sheet and Statement of Cash Flows - Review and Practice - Questions - Page 237: 2


Generally, solvency can be referred to the ability of a company to meet its debts as they fall due. Similarly, some of the information found in the balance sheet such as long term debts as well notes payable in comparison to the company's enterprise can be extensively used to access resources that will be needed to meet obligations as they fall due.

Work Step by Step

Notably, when a company carries out a high level of long-term debt relative to the assess it has a lower solvency level.
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