Financial Definitions - Asset Coverage
Asset coverage usually refers to the net assets of a company ability to pay down (if need be) debts of any kind. These debts can also be market equity positions investments, or perhaps preferred stock items. There is a specific way asset coverage is calculated - as follows. Take the asset(s) at sell-out or “liquidation value” and then you subtract all present debts and liabilities, all intangible assets, and all financial commitments. When you have your result, you then divide by the $ amount of the loan. This will give you the what they call the “asset coverage ratio”.
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