Dictionary of Banking Terms: asset coverage
asset coverage
measure of an organization's solvency or its ability to pay back bank debt and other credit obligations from earnings, usually expressed as a ratio of balance sheet assets to long-term debt. The ratio of assets to long-term debt is computed by dividing total assets (less intangible assets, current liabilities, and existing senior debt) by the total debt being considered. The result can be expressed as a ratio, a percentage, or in dollar terms. Also called debt service ratio.
Dictionary of Finance and Investment Terms: asset coverage
asset coverage
extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.
Asset coverage is important as a cushion against losses in the event of liquidation.
