{"id":5949,"date":"2025-10-04T18:38:37","date_gmt":"2025-10-04T16:38:37","guid":{"rendered":"https:\/\/tulipemedia.com\/?p=5949"},"modified":"2025-11-29T01:58:06","modified_gmt":"2025-11-29T00:58:06","slug":"ratio-liquidite-solvabilite","status":"publish","type":"post","link":"https:\/\/tulipemedia.com\/en\/ratio-liquidite-solvabilite\/","title":{"rendered":"Solvency and liquidity ratios in corporate finance"},"content":{"rendered":"

In this new course taken from the\u00a0Complete Guide to Business Management<\/a><\/strong>, we will discover together the liquidity and solvency ratios<\/strong>, always with the aim of becoming knowledgeable in management and corporate finance<\/strong>, especially for beginners, managers and especially entrepreneurs who would like to create or develop their business without falling into management traps.<\/p>\n

First, let's quickly recall what we learned in the previous chapters about the functional assessment<\/strong>, then let's define together very simply what the liquidity<\/strong> and the solvency<\/strong> of a company, which are concepts relating to ratios which make it possible to evaluate the financial health<\/strong> of a company.<\/p>\n

Reminder on the functional assessment<\/h2>\n

As a reminder, the functional balance sheet is a rereading of the classic accounting balance sheet<\/strong> in the form of balance sheet masses<\/strong> relevant from a financial point of view. The positions are reclassified according to their function<\/strong> in the operating cycle<\/strong> (investment, operation, financing), which makes it possible to produce a financial structure analysis<\/strong>, autonomy and balance of the company.<\/p>\n

\"Theoretical
Theoretical diagram of a functional assessment<\/figcaption><\/figure>\n

In the functional assessment, we can identify the resources and long-term jobs on one side<\/strong>, and on the other the short-term resources<\/strong> (or current liabilities) as well as the company's relatively liquid assets<\/strong> (current assets).<\/p>\n

It is generally said that ideally, the long-term resources should be able to finance at least long-term jobs <\/strong>(this is the working capital<\/a>), which ensures the solvency of the company by guaranteeing that fixed assets<\/strong>, which are less liquid, are covered by stable funding<\/strong> (and not through current liabilities), thus reducing the risk of short-term insolvency.<\/p>\n

\"Balance
Balance sheet with positive working capital: the FR covers the WCR and generates net cash<\/figcaption><\/figure>\n

We have seen all this in the previous chapters of this business management guide<\/a>This reminder of the functional balance sheet allows us to better understand the subtleties relating to solvency, because the measurement of the latter results from the balance between the different balance sheets.<\/p>\n

Definition of the solvency ratio<\/h2>\n

Let us now move on to the definition of solvency, and solvency ratios. solvency<\/strong> actually measures the a company's ability to meet its debts as they fall due, whether short, medium or long term.<\/strong><\/p>\n

It reflects the overall financial strength of the company<\/strong>, especially in the long term, unlike liquidity<\/strong>, which focuses on the ability<\/strong> to face the short-term commitments<\/strong>.<\/p>\n

It's an approach heritage<\/strong> And theoretical<\/strong> : the company is not supposed to repay everything immediately, but we check whether, overall, it has \u201cassets\u201d greater than its debts.<\/p>\n

Financial institutions often use solvency ratios<\/strong> For assess capacity<\/strong> of a borrower to repay a loan before granting it. These ratios reflect both:<\/p>\n