a) is an estimate of the total debt a company or an individual can realistically pay back before a pre-set deadline with the funds and resources that are already available without putting the financial viability of the business at risk. This amount can be calculated with a formula that includes outstanding debts and any other possible financial obligations that a company may have.
b) is the gross amount of debt a company can acquire that is regulated by the stipulations of a loan arrangement, or by the organization’s article of association.
In a Sentence:
According to the figures presented to the board, the company hasn’t reached its debt capacity yet. This is good news since that means that Joy-One can afford taking an additional debt to support the development of its new plush penguin toy product.
It seems that we won’t be able to take another loan as our debt capacity has been reached. I just got off the phone with Michael, and he claims that any additional debt will place us in a bad position in the eyes of the credit rating agencies.
Synonyms and related words: debt capacity analysis, debt, financial viability, articles of incorporation, debt-to-equity ratio