Calculate Solvency Ratio

Solvency is a financial metric that measures a company's capacity to meet its long-term obligations. The ratio is calculated by dividing the net income plus depreciation by total liabilities.

Solvency is calculated by adding net income and depreciation together and dividing this total by total liabilities. This result is then multiplied by 100 to express the solvency as a percentage.

The solvency ratio is important as it is an indicator of a company's financial health. A higher solvency ratio indicates that a company is better able to meet its long-term financial obligations, suggesting a more stable financial position.

What is considered a "good" solvency ratio can vary depending on the industry and other factors, but generally, a ratio of 20% or higher is seen as healthy. Lower ratios may indicate potential financial difficulties.