Common coverage ratios include the interest coverage ratio, debt service coverage ratio, and asset coverage ratio. Coverage ratios come in several forms and can be used to help identify companies in a potentially troubled financial situation, though low ratios are not necessarily an indication that a company is in financial difficulty.
How do you calculate asset coverage ratio?
The asset coverage ratio is calculated with the following equation: ( (Assets – Intangible Assets) – (Current Liabilities – Short-term Debt)) / Total Debt In this equation, "assets" refers to total assets, and "intangible assets" are assets that can't be physically touched, such as goodwill or patents.
What is asset coverage ratio?
The asset coverage ratio is a financial metric that measures how well a company can repay its debts by selling or liquidating its assets. The asset coverage ratio is important because it helps lenders, investors, and analysts measure the financial solvency of a company.
