debt (noun, debt, \ ˌkɑːmpəˈtɪʃn \) capacity (noun, ca-pac-i-ty, \ kəˈpæsəti \)
- 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