solvointi

Solvointi is the Finnish term for solvency, the ability of a person or organization to meet long-term financial obligations as they come due. It is a measure of financial health that complements liquidity, which concerns short-term cash flow and the immediate ability to pay bills. A company with high solvency can absorb losses, service debt, and continue operations under adverse conditions, while a solvent entity maintains operations and meets obligations over the longer term.

Measurements of solvency vary by context. In individuals, solvency is typically assessed through net worth, stable income, and the sustained ability to service debt over time. In organizations, solvency is evaluated with ratios such as the equity ratio (shareholders’ equity relative to total assets), the debt-to-assets ratio, and, for capital-intensive sectors, risk-based capital or times-interest-earned ratios. Creditors and regulators may also examine long-term cash flow projections, asset quality, and leverage as indicators of solvency.

Regulatory context is particularly important for financial institutions. Banks often follow capital adequacy frameworks (such as Basel III) that address leverage, profitability, and liquidity to ensure long-term solvency. Insurance companies operate under solvency regimes (such as Solvency II) requiring capital reserves proportional to risk. Public-sector solvency is assessed through budgetary sustainability, debt levels, and long-term liabilities.

Improving solvency can involve increasing equity, reducing high-cost debt, enhancing profitability and asset quality, and implementing stronger risk management. Structural measures such as restructuring, asset sales, and disciplined cost control may also bolster long-term financial capacity. See also liquidity, financial health, capitalization.