Solvency ratios are financial ratios that assess a company’s ability to meet its long-term obligations and remain financially stable in the long run. These ratios provide insights into a company’s capacity to generate enough cash flows to cover its debt obligations. Here are some common solvency ratios used in financial analysis:

1. Debt-to-Equity Ratio: This ratio compares a company’s total debt to its shareholders’ equity and indicates the proportion of debt financing relative to equity financing. A higher ratio suggests higher financial risk and dependency on debt financing.Debt-to-Equity Ratio = Total Debt / Shareholders’ Equity
2. Debt Ratio: The debt ratio measures the percentage of a company’s assets that are financed by debt. It indicates the company’s ability to withstand financial pressure and the level of risk associated with its capital structure.Debt Ratio = Total Debt / Total Assets
3. Equity Ratio: The equity ratio measures the percentage of a company’s assets that are financed by shareholders’ equity. It reflects the proportion of ownership and the ability of shareholders’ equity to cover liabilities.Equity Ratio = Shareholders’ Equity / Total Assets
4. Interest Coverage Ratio: This ratio evaluates a company’s ability to meet its interest obligations on its outstanding debt. It shows how many times the company’s operating income covers its interest expenses. A higher ratio suggests better solvency and lower financial risk.Interest Coverage Ratio = Operating Income / Interest Expenses
5. Debt Service Coverage Ratio (DSCR): DSCR measures the ability of a company to meet its debt service requirements, including interest and principal payments. It assesses whether a company generates sufficient operating income to cover its debt obligations. Lenders often use this ratio to evaluate the risk of lending to a company.DSCR = Operating Income / Total Debt Service
6. Cash Flow to Debt Ratio: This ratio indicates the ability of a company to generate sufficient cash flow to cover its outstanding debt. It assesses the company’s capacity to repay its debt using its operational cash flows.Cash Flow to Debt Ratio = Operating Cash Flow / Total Debt

These solvency ratios help analysts and investors assess a company’s long-term financial health, its ability to manage debt, and the level of risk associated with its financial structure. However, it’s important to consider industry norms, company size, and other contextual factors while interpreting these ratios, as optimal values may vary across industries.