Financial Ratio 2 – Solvency Ratio

This ratio measures the potential longer-term solvency problem. It compares the total networth to the total assets. This ratio indicates the probability that a person will go bankrupt.Reducing your liabilities as soon as possible will improve your financial health.

 Solvency Ratio = Net Worth divided by Total Assets

The higher the ratio, the stronger is the financial position. More than 50% is the acceptable safe limit.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>