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Imagine that you are talking to someone who has no financial background. How would you explain...

Imagine that you are talking to someone who has no financial background. How would you explain the concept of solvency/IRR/ROE

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Solvency refers to the ability of a company to pay of its borrowings. It represents the ability of a company to meet its long-term financial obligations and is important for assessing whether a company is headed towards bankruptcy or is financially stable.

IRR represents internal rate of return which is the rate of return at which the net present value of a particular capital project is zero. It is that rate at which the present value of future cash inflows is equal to the initial cost of investment.

ROE represents return on equity which is calculated as NET income divided by equity in the company. It represents the return generated by the business on equity invested by its owners.

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