Ability to pay

Definition:

Refers to the borrower's ability to make interest and principal payments on debts. See: Fixed charge coverage ratio.
In context of municipal bonds, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values.
In context of taxation, notion that tax rates should be determined according to income or wealth.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Force Majeure

Events outside the control of the parties. These events are acts of man, nature, governments and regulators, or impersonal events. Contract performance is forgiven or extended by the period of force... Read More

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