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Asset Coverage Ratio |
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Asset Coverage Ratio A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following:  Notes: When calculating the asset coverage ratio, investors should exercise caution with respect to asset value. Using the book value of assets may result in an inaccurate asset coverage ratio if the actual liquidation value of assets is significantly less. As a rule of thumb, utilities should have an asset coverage ratio of at least 1.5, and industrial companies should have a ratio of at least 2.See also: Asset, Book value, Current liabilities, Debt, Intangible Asset, Net Liquid Assets, Solvency |
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One metric that is disadvantaged by these growing asset classes is the company's unencumbered asset coverage ratio, which currently stands at a relatively low 1. To meet the triple-A rating guidelines by both agencies, the Fund adheres to various eligibility and diversification limitations that supplement regulatory requirements of the Investment Company Act of 1940, as amended (the "1940 Act"), mandating an asset coverage ratio of 200% to cover the Fund's liabilities. In addition, the asset coverage ratio was reduced and interest margins were lowered. |
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Asset Coverage Ratio
