Solvency Ratios

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Solvency and leverage ratios measure how well a company is able to meet it's long-term debt commitments. In this section, we cover the most important solvency ratios you need to know.

What are Solvency/Leverage Ratios?

Solvency ratios, also known as leverage ratios, look into a company’s capacity to maintain operations by analyzing its debt levels with respect to its assets, equity, and income.

Solvency ratios pinpoint financial issues going on in the business and its ability to cover its bills over the long term. A lot of people think solvency ratios are the same as liquidity ratios.

While the two assess a company’s ability to settle its debts to creditors, banks and bondholders, solvency ratios are more concerned with the longevity than current liabilities. Good solvency ratios mean the company is creditworthy and financially healthy overall.

The Complete List of Solvency Ratios

Below is the complete list of solvency and leverage ratios we have covered. Each will provide a detailed overview of the ratio, what it’s used for, and why.

They also explain the formula behind the ratio and provide examples and analysis to help you understand them.

Interest Expense to Debt Ratio

The interest expense to debt ratio (IE/D) determines the rate of interest paid by a business on its total debt. It’s a solvency…

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Financial Leverage Index

The financial leverage index is a solvency ratio that measures the proportion of a company’s debt compared to its equity…

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Net Debt to EBITDA Ratio

The net debt to EBITDA ratio is a leverage metric that measures the amount of net income that is available…

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Debt to EBITDA Ratio

The debt to EBITDA ratio is a leverage metric that measures the amount of income that is available to pay…

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Fixed Assets to Net Worth Ratio

Fixed assets to net worth, also known as the non-current assets to net worth ratio, is a financial ratio used…

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Debt to Net Worth Ratio

The debt to net worth ratio is a financial metric used in comparing the level of debt of a company…

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Non-Current Assets to Net Worth Ratio

Non-current assets to net worth ratio is an indicator comparing the value of non-current or long-term assets of a company…

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Long Term Debt to Equity Ratio

Long term debt to equity ratio is a leverage ratio comparing the total amount of long-term debt against the shareholders’…

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Long Term Debt to Capitalization Ratio

Long term debt to capitalization ratio is a variation of the debt to equity ratio. It is used to define…

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Long Term Debt Ratio

Long term debt ratio is one of the financial leverage ratios measuring the proportion of long-term debt used to finance…

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Long Term Debt to Total Assets (LTD/TA)

Long term debt to total assets ratio (LTD/TA) is a metric indicating the proportion of long-term debt—obligations lasting more than…

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Times Interest Earned Ratio

The times interest earned ratio is also known as the interest coverage ratio and it’s a metric that shows how…

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Loan to Value Ratio (LTV)

Loan to value ratio (LTV) is a concept that describes the relationship between a loan and the value of an…

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Equity Ratio

The equity ratio is an indicator that gauges the amount of leverage that a company uses to finance its operation…

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Debt to Asset Ratio

Debt to asset, also known as total debt to total asset, is a ratio that indicates how much leverage a company…

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Current Yield

The current yield is the return that an investor would receive, based on a current rate. This formula is specifically…

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Debt Ratio

Debt ratio is a measurement that indicates how much leverage a company uses to finance its operation by using debt…

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Debt to Equity

Debt to equity is a financial liquidity ratio that measures the total debt of a company with the total shareholders’…

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