A solvency ratio measures a company’s ability to meet its long-term financial obligations and remain financially stable over time. It focuses more on overall debt burden and capital structure than on short-term liquidity. Lenders and investors use solvency ratios to assess whether the business is financially sound enough to sustain operations and repay long-term borrowings.
Systematic Allocation
Systematic allocation means spreading a cost over time or across units using a consistent and rational method. Depreciation and amortization are common examples of...
Suspense Account
A suspense account is a temporary account used to hold amounts when the correct accounting treatment or account head is not yet known. It...
Sunk Cost
A sunk cost is a cost that has already been incurred and cannot be recovered, regardless of future decisions. Since it cannot be changed,...
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