In the context of finance and accounting, solvency refers to the state of having sufficient assets to cover liabilities. It is a crucial aspect of financial health, indicating whether a company can meet its long-term debts and obligations. Solvency can be evaluated using various financial metrics, including the solvency ratio, which is computed by dividing total assets by total liabilities. A solvency ratio greater than 1 generally indicates a solvent entity, while a ratio less than 1 suggests potential insolvency problems.