Coverage ratios

Coverage ratios

Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed-charge coverage ratio.

Coverage Ratio

Any ratio measuring one's ability to pay a certain expense. There are various kinds of coverage ratio. For example, one may take a ratio of a company's monthly cash flow to its monthly debt service. Generally speaking, a coverage ratio at or above 1 indicates that a company can pay the stated expense, while a ratio below 1 indicates the opposite.
References in periodicals archive ?
The China Banking Regulatory Commission currently sets the minimum statutory coverage ratio for bad loans at 150 percent, and this gives banks less room to smooth out their earnings after letting their coverage ratios for bad loans fall close to the regulatory minimum.