Debt Capacity
/ˈdɛt kəˈpæsɪti/
Definitions
- (n.) The maximum amount of debt a person or entity can borrow under law or financial guidelines.
The company's debt capacity determines how much it can borrow without defaulting.
- (n.) A legal or contractual limit on the amount of debt an entity may incur.
The loan agreement restricts the borrower's debt capacity to prevent overleveraging.
Related terms
Commentary
Debt capacity is often analyzed in financial and corporate law contexts to assess permissible borrowing levels under contracts and regulatory frameworks.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.