Business Glossary

Finance: borrower's ability to meet principal and interest payments on long-term obligations out of earnings. Also called ability to service. See also fixed-charge coverage .
Industrial relations: ability of an employer, especially a financial organization to meet a union's financial demands from operating income.
Municipal bonds: issuer's present and future ability to generate enough tax revenue to meet its contractual obligations, taking into account all factors concerned with municipal income and property values.
Taxation: the concept that tax rates should vary with levels of wealth or income; for example, the progressive income tax.

capacity to meet future obligations from earnings or income.

1. Banking.A borrower's capacity to make principal and interest payments from disposable income. Lenders look closely at a credit applicant's current salary and expected future earnings, and at an organization's cash flow from conversion of assets into cash.See also balance sheet ratios five C's of credit qualifying ratio
2. Securities, municipal bonds.The issuer's capacity to generate sufficient income from taxes or other sources to meet contractual obligations.
3. Finance.The ability to meet debt service payments on bonds and other long-term obligations.

Finance:borrower's ability to meet principal and interest payments on long-term obligations.
Industrial relations:ability of an employer, especially a financial organization, to meet a union's financial demands from operating income.
Municipal bonds:issuer's present and future ability to generate enough tax revenue to meet its contractual obligations.
Public policy:charging fees or pricing based on the user's income level.
Taxation:concept that tax rates should vary with levels of wealth or income; for example, the progressive income tax.