Solvency

Imagine you have a piggy bank where you save your pocket money. You use this money to buy things you want or need over time.

Solvency is a big, complicated word that means whether or not you have enough money to pay for all the things you need to pay for.

For example, if you wanted to buy a bicycle that cost all the money you had in your piggy bank, you would not be solvent anymore. You might not have enough money to pay for other things you need, like food or clothes.

Companies and people also need to make sure they are solvent. They need to have enough money to pay for all the things they need to pay for, like rent, salaries, taxes, and more.

Being solvent is important because it means you can keep doing the things you want or need to do, without running out of money.