Debt Repayment Capacity

Debt repayment capacity refers to an individual's or organization's ability to meet their debt obligations. It assesses how much of their income or revenue can be allocated towards paying off debts, considering factors like regular earnings, existing financial commitments, and overall financial health. A strong debt repayment capacity means they can comfortably pay back loans without compromising essential expenses, while a weak capacity indicates potential difficulty, which can lead to missed payments or default. Understanding this concept is crucial for managing finances and ensuring long-term financial stability.