Solvency is the measure of long run financial health of an enterprise. It refers to an enterprise's capacity to meet its long-term financial commitments. A solvent company is one that owns more than it owes; in other words, it has a positive net worth and a manageable debt load. Solvency is essential to staying in business as it asserts a company’s ability to continue operations into the foreseeable future. In fact, the debt-paying ability of an enterprise depends upon its solvency position, the balance between debts of the capital structure, the risk of not meeting the principal or interest obligation is increased because the company may not be able to generate adequate funds to meet these obligations.