Liquidity and Solvency Analysis

Small businesses should conduct a liquidity and solvency analysis to ensure they can meet their financial obligations and maintain their operations.

These analyses provide a comprehensive picture of a company’s financial strength—helping owners, investors, and advisors make confident, data-driven decisions.

    • Liquidity analysis evaluates a company's capacity to meet its short-term financial obligations. It sheds light on the firm's financial stability by assessing its readily accessible assets to cover current liabilities.

    • Solvency analysis examines whether a company possesses sufficient assets and cash flow to meet its long-term financial obligations.

    • Unlike liquidity analysis, which examines short-term ability to pay bills, solvency analysis is concerned with long-term financial viability and overall stability.