Definition of Asset Coverage Ratio

Definition of Asset Coverage Ratio

Definition:

Asset Coverage Ratio is used to measure the efficiency of the company that how efficiently a company can repay its debt obligation by selling its assets.

So from this ratio investors analyze that how much assets a company requires to pay the debt obligation.

Definition of Asset Coverage Ratio

For the equity investors and debt investors, assets coverage ratio is important because from this ratio both estimate the worth of the assets of the company as compared to the debt obligation of the company.

For the measurement of capital management, financial stability, and overall riskiness of the company analyst also use the Asset coverage ratio.

If the ratio of the company is high then for investors such type of company is better.

Financial Ratio is a forum where you will learn about all ratios definitions and formulas.

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