Solvency
Whether the company can survive in the long run, given what it owes.
Solvency asks whether total assets exceed total liabilities, and whether the business generates enough to service its debts over time. Liquidity is about this month; solvency is about the decade.
A company can be liquid but insolvent (plenty of cash, hopeless debts) or solvent but illiquid (valuable assets, no cash to hand). Both kill, on different timescales.
Why a solvent bank can die in 48 hours
The bank lent your deposit out. That is not a scandal, it is what a bank is. It only becomes fatal when everyone asks for their money on the same afternoon.
It determines whether the equity is worth anything at all in a bad scenario.
Assuming a profitable year means a solvent balance sheet.
Related terms
See Solvency on a real company
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