Define- a) Short-term Solvency

b) Long-term Solvency

Short-Term Solvency: Short-term solvency is the position of current assets as compared to the current liabilities of an enterprise. The purpose of analysing short-term solvency is to know whether the current assets are sufficient to meet the current liabilities.

Long-Term Solvency : Long-term solvency is the proportion of long-term debts in comparison of total assets and shareholder's funds. The objective of long-term solvency is to know the claims of long-term debt on the total assets of the firm and also determines the ratio between shareholders' funds and long term loans.