What fundamental quality is assessed to determine a company's ability to support debt?

The ability of a company to support debt is primarily assessed through its cash flow stability. This assessment is crucial because lenders and investors want to ensure that a company generates sufficient cash flow to cover its operational expenses, interest payments, and principal repayment obligations. Stable cash flow indicates that the company can maintain its financial commitments even during fluctuating economic conditions.

Cash flow stability helps gauge the overall financial health and operational efficiency of the business, reflecting its capacity to generate money from its core operations. Companies with strong cash flow generation are in a better position to take on and manage debt because they have predictable incoming cash to meet their obligations. This is why cash flow stability is a fundamental quality in assessing a company's leverage capabilities and overall creditworthiness.