What is the legal limit on the amount of bonds outstanding typically expressed as?

The legal limit on the amount of bonds outstanding is typically expressed as an entity's legal debt capacity. This concept refers to the maximum amount of debt that a governmental entity, such as a municipality or state, is permitted to incur as determined by various laws, regulations, or tax structures. Legal debt capacity is often imposed to protect the fiscal integrity of the entity and ensure that it does not overextend itself financially.

Entities must adhere to these legal limits to maintain their creditworthiness and avoid jeopardizing their ability to finance essential services and projects through debt. Legal debt capacity calculations often take into account various factors, including property values, revenue streams, and debt levels, so that an organization can effectively gauge its borrowing potential without risking financial distress.

In contrast, total liabilities represent the complete financial obligations of an entity but do not reflect legal constraints on borrowing. A ratio of annual revenues to debt might provide insights into the organization's ability to service debt but does not directly indicate the legal limits imposed. Similarly, an organization’s credit rating reflects its overall perceived financial risk by investors or rating agencies, which may be influenced by its legal debt capacity but is not a direct expression of it.