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Being financially solvent means being able to pay all financial obligations in a timely manner and still have liquid spending capital left over. Individuals in this state are not burdened by financial debt and generally have a good credit rating. The state of being financially solvent applies to businesses and individuals who are able to meet all debts in a timely fashion without having to deplete cash reserves in the process.
Sometimes referred to being in the black or in the pink, being financially solvent generally represents a certain level of financial freedom. Individuals and businesses operating in this state have sound control over their finances, which translates into greater credibility when doing business with others. Able to meet all financial obligations while still having money left over is a state that most people aspire to regardless of career or current economic status.
Individuals who are financially insolvent, on the other hand, are those who have great difficulty paying debts on time. In addition to feeling a financial strain as the result of being insolvent, people and businesses in this predicament often experience poor credit reputations with others. Often, this translates into the inability to obtain future credit or being charged a higher interest rate when credit is extended, particularly in comparison to the rates offered to those who are financially solvent. It is not unusual for those who are not solvent to have a greater need for government assistance, file bankruptcy or seek financial bailouts through other methods and sources.
To be financially solvent generally means an ability to enjoy levels of financial freedom that are not available to insolvent businesses and individuals. In addition to meeting financial obligations, such as paying bills and paying employees on time, financially solvent individuals and businesses are able to save or invest additional monies in ideas and activities at will. Doing so often results in personal growth and business expansion.
While being financially solvent means the ability to pay debts on time, an important aspect of this state is the ability to have money left over after doing so. Many people work hard to regularly meet financial obligations on time, but find it difficult to budget finances in such a way so as to have discretionary cash left over after all bills are paid. Being able to practice one aspect of solvency without the other does not qualify one as being completely financially solvent.
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