Solvency
Solvency is an indication of a business having sufficient value of assets to meet its long-term financial commitments. It is measured by the net worth statement, often called a balance sheet.
A business is solvent if the value of its assets (value of the business) is greater than its liabilities (the amount the business owes to parties outside of the business). If the liabilities are greater than the value of the assets, the business is insolvent and subsequently bankrupt.
Understanding Net Worth provides you with the essentials of a net worth statement and what it means. Developing a Net Worth Statement for a value-added business provides directions for completing net worth statements. Analyzing a Net Worth Statement gives you insights into the financial health of your business.
On the right, you will see calculators and worksheets available on the Business Workbench. For more information on this topic, see the links listed below of articles posted on related Web sites.
Net Worth Statements
- Balance Sheet: A Financial Management Tool – Texas A & M University Extension -- A statement of the financial status of the business at a point in time.
- The Balance Sheet: What Does it Mean – Ohio State University Extension -- The purpose of a balance sheet is to report the financial position of a company at a certain point in time.
- A Beginner's Guide to the Balance Sheet – University of Florida Extension -- This paper introduces the balance sheet and shows how to perform a simple balance sheet analysis.
- Balance Sheet – CCH Business Owner’s Toolkit -- Also called a statement of financial position, a balance sheet is a financial "snapshot" of your business at a given date.
- Balance Sheet Template – CCH Business Owner’s Toolkit -- If you would like to try preparing a balance sheet for your business, you can use the spreadsheet template, contained in the attached file, as a starting point.
- Balance Sheet – Small Business Notes -- The balance sheet is a snapshot of the company's financial standing at an instant in time.
Solvency
- How Much Debt Can a Farm Carry – Kansas State University Extension.
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