What financial metric helps evaluate a company's ability to stay solvent?

The solvency ratio is a critical financial metric that assesses a company's ability to meet its long-term obligations. It provides insight into the financial stability and health of an organization by measuring the relationship between its total assets and total liabilities. A higher solvency ratio indicates that the company has a stronger capacity to cover its debts, suggesting a lower risk of default and greater financial security.

While liquidity ratios focus on the company's short-term financial obligations and profitability ratios assess a company's ability to generate earnings compared to its expenses, the solvency ratio specifically addresses long-term stability. Efficiency ratios evaluate how well a company utilizes its assets to produce revenue but do not directly relate to the evaluation of solvency. Therefore, the solvency ratio is the most relevant metric when determining a company's capacity to maintain its financial commitments over the long term.