Fixed Income

Debt Capacity

Definition

What is Debt Capacity?

The amount of debt an entity can reasonably support without excessive default risk.

Example in practice

Stable utility cash flows may support more debt capacity than cyclical earnings.

Keep learning

A debt security through which an investor lends money to an issuer in return for promised payments.

The government, company, or organisation that creates and sells a security.

The principal amount stated on a bond and usually repaid at maturity.

A short-term government debt instrument usually issued at a discount and repaid at face value.

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