Solvency refers to the ability of an individual or organization to meet its long-term financial obligations. It indicates whether the total assets exceed total liabilities, meaning that the entity can pay off its debts when they come due. A solvent entity is generally considered financially healthy and stable. In finance, solvency is often assessed using ratios, such as the debt-to-equity ratio or the current ratio. These metrics help stakeholders, including investors and creditors, evaluate the financial strength of a company. Maintaining solvency is crucial for businesses to sustain operations and foster growth.