What is Solvency Risk Ratio?
The Solvency Risk Ratio provides insight into the financial leverage of a company and its ability to absorb losses or downturns in business without jeopardizing its long-term viability. A higher Solvency Risk Ratio indicates a lower level of financial risk, as it means that a greater portion of the company's assets is financed by equity rather than debt. Conversely, a lower Solvency Risk Ratio suggests higher financial risk, as it means that a larger proportion of the company's assets is financed by debt.
Lenders, investors, and analysts use the Solvency Risk Ratio to evaluate a company's financial health and risk profile. It is often compared over time to track changes in the company's capital structure and to assess the impact of debt management strategies on its long-term solvency. Additionally, it is compared with industry benchmarks and competitors to gauge relative financial strength and risk.
How to Calculate Solvency Risk Ratio?
Solvency Risk Ratio calculator uses Solvency Risk Ratio = Total Assets/Total Long Term Debt to calculate the Solvency Risk Ratio, The Solvency Risk Ratio is a financial metric used to assess the long-term financial stability and ability of a company to meet its long-term debt obligations. Solvency Risk Ratio is denoted by SRR symbol.
How to calculate Solvency Risk Ratio using this online calculator? To use this online calculator for Solvency Risk Ratio, enter Total Assets (TA) & Total Long Term Debt (TLTD) and hit the calculate button. Here is how the Solvency Risk Ratio calculation can be explained with given input values -> 1.894737 = 720000/380000.