Solvency in the construction industry - Revision history

Designing Buildings at 08:14, 22 December 2020

2020-12-22T08:14:24Z

← Older revision		Revision as of 08:14, 22 December 2020
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	Solvency is not the same as liquidity, which refers to the availability of liquid assets (i.e. cash), and how easy it is for other assets to be converted to cash.		Solvency is not the same as liquidity, which refers to the availability of liquid assets (i.e. cash), and how easy it is for other assets to be converted to cash.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
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−	=== Related articles on Designing Buildings Wiki ===	+

	* Accounting.		* Accounting.
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	* Yield.		* Yield.

−	[[Category:~~Standards_/_measurements~~]] [[Category:DCN_Standard]] [[Category:Cost_/_business_planning]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Standard]] [[Category:Definitions]] [[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]]

Editor at 16:45, 29 June 2018

2018-06-29T16:45:10Z

← Older revision		Revision as of 16:45, 29 June 2018
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	* Carillion.		* Carillion.
	* Cash flow.		* Cash flow.
		+	* Cash flow statement.
	* Corporate finance.		* Corporate finance.
	* Insolvency Act 1986 - Use of Prohibited Names.		* Insolvency Act 1986 - Use of Prohibited Names.
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	* Yield.		* Yield.

−	[[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]]	+	[[Category:Standards_/_measurements]] [[Category:DCN_Standard]] [[Category:Cost_/_business_planning]]

Editor at 13:44, 18 May 2018

2018-05-18T13:44:21Z

← Older revision		Revision as of 13:44, 18 May 2018
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	* Net Present Value.		* Net Present Value.
	* Profitability.		* Profitability.
		+	* Turnover.
	* Working capital.		* Working capital.
	* Yield.		* Yield.

	[[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]]		[[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]]

Designing Buildings at 14:39, 25 April 2018

2018-04-25T14:39:18Z

← Older revision		Revision as of 14:39, 25 April 2018
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−	‘Solvency’ describes the ability of a ~~debtor~~ to service its debts ~~and achieve expansion and growth of the business over the long-term~~. In simple terms, ~~this means that~~ the value of a company’s ~~current~~ assets must be greater than the sum of its ~~debt liabilities. It is essential for a company to be solvent in order to continue in business~~.	+	‘Solvency’ describes the ability of a company to service its debts. In very simple terms, to be solvent, the value of a company’s assets must be greater than the sum of its debts.

−	~~Solvency~~ is not the ~~same as liquidity~~, ~~which refers to~~ the ~~availability~~ of ~~liquid assets (i.e~~. ~~cash)~~, ~~and how easy it is for other assets to~~ be ~~converted~~ to ~~cash~~.	+	A company that is not solvent can still continue to operate in the short term, for example, if the company takes on debt with the intention of expanding their operations and growing business. In the short term, they may be unable to service the debt from their existing assets. However, the creditor assumes that increased revenue from the investment will enable the company to service its debts in the longer-term.

−	Short-term solvency can be measured by the current ratio – calculated by dividing current assets by current liabilities. The solvency ratio can be used to measure longer-term solvency – calculated by dividing the company’s net ~~worth~~ by its ~~total assets~~.	+	Short-term solvency can be measured by the current ratio – calculated by dividing current assets by current liabilities. The solvency ratio can be used to measure longer-term solvency – calculated by dividing the company’s net income + depreciation by its long term and short term liabilities.

−	In the UK, an insolvent company is unable to service its debts ~~and will~~ be ~~forced~~ into ~~‘liquidation’~~ or ~~‘administration’, while individuals are made ‘bankrupt’. For more information, see Insolvency in the construction industry~~.	+	In the UK, an insolvent company is one that is unable to service its debts. Insolvent companies may be put into 'liquidation' or 'administration'.

−	~~However~~, ~~it should be borne~~ in ~~mind that a company can still be profitable while also being insolvent. This can happen when, for instance, a company takes on debt with~~ the ~~intention of expanding their operations and growing business~~. In the ~~short term~~, ~~they may be unable~~ to ~~service~~ the ~~debt from their existing~~ assets. ~~The creditor assumes that increased~~ cash ~~flows from the investment in the operations expansion will enable the company~~ to ~~service debts in the longer-term~~.	+	For more information, see Insolvency in the construction industry.
		+
		+	Solvency is not the same as liquidity, which refers to the availability of liquid assets (i.e. cash), and how easy it is for other assets to be converted to cash.

	= Find out more =		= Find out more =

Editor: Created page with "‘Solvency’ describes the ability of a debtor to service its debts and achieve expansion and growth of the business over the long-term. In simple terms, this means that the va..."

2018-04-16T12:15:52Z

Created page with "‘Solvency’ describes the ability of a debtor to service its debts and achieve expansion and growth of the business over the long-term. In simple terms, this means that the va..."

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‘Solvency’ describes the ability of a debtor to service its debts and achieve expansion and growth of the business over the long-term. In simple terms, this means that the value of a company’s current assets must be greater than the sum of its debt liabilities. It is essential for a company to be solvent in order to continue in business.

Solvency is not the same as liquidity, which refers to the availability of liquid assets (i.e. cash), and how easy it is for other assets to be converted to cash.

Short-term solvency can be measured by the current ratio – calculated by dividing current assets by current liabilities. The solvency ratio can be used to measure longer-term solvency – calculated by dividing the company’s net worth by its total assets.

In the UK, an insolvent company is unable to service its debts and will be forced into ‘liquidation’ or ‘administration’, while individuals are made ‘bankrupt’. For more information, see Insolvency in the construction industry.

However, it should be borne in mind that a company can still be profitable while also being insolvent. This can happen when, for instance, a company takes on debt with the intention of expanding their operations and growing business. In the short term, they may be unable to service the debt from their existing assets. The creditor assumes that increased cash flows from the investment in the operations expansion will enable the company to service debts in the longer-term.

= Find out more =

=== Related articles on Designing Buildings Wiki ===

* Accounting.
* Business administration.
* Carillion.
* Cash flow.
* Corporate finance.
* Insolvency Act 1986 - Use of Prohibited Names.
* Insolvency in the construction industry.
* Net Present Value.
* Profitability.
* Working capital.
* Yield.

[[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]]