Solvency

[curiousmind45451]

Hi everyone,

Just a layman kinda interested in accountancy sometimes, you can kinda considered this a hobby, not my real proffesion, so if this is wrong place, can you recommend the right forum ?
Topic is about solvency, google says a good solvency is above 20%, this I do not understand, isnt a solvency of above 50% better ? This means you can pay all the debts with the equity immediately. If it is lower than 50% you cannot pay off the debt immediately.

Br,

 

[kirby]

isnt a solvency of above 50% better ?
Well, yes, kind of like saying an IQ of 120 is better than an IQ of 100
So the 20% "rule" is just a very very very rough "rule of thumb". It would not work in all industries.