Define solvency in financial terms.

Solvency is defined as a company’s ability to meet its long-term financial obligations. This concept is crucial for understanding a company's overall financial health, particularly in assessing whether it can continue to operate over the long term without falling into financial distress. When a company is solvent, it means that its assets exceed its liabilities, indicating that it has the necessary resources to cover its long-term debts and obligations.

In contrast, the other options do not accurately describe solvency. Generating revenue is related to a company's operational efficiency and profitability but does not specifically address its ability to meet obligations. Measuring short-term financial stability relates more to liquidity, which is concerned with the ability to meet short-term payments rather than long-term obligations. Finally, investment risk pertains to the potential for financial loss or underperformance, which is a different aspect of financial analysis that does not directly define solvency. Understanding solvency is essential for investors and creditors who need to evaluate the risk of lending to or investing in a business.