UK Accounting Glossary
The Asset Coverage Ratio measures the ability of a company to cover it’s debt obligations with it’s assets.
A ratio that provides a measure of the solvency of a company; it consists of it’s net assets divided by it’s debt.
Companies with high asset cover are considered more solvent.
The asset coverage ratio is a risk measurement that calculates a company’s ability to repay it’s debt obligations by selling it’s assets.
Asset coverage ratio formula is calculated by subtracting the current liabilities less the short-term portion of long term debt from the totals assets less intangibles and dividing the difference by the total debt.
In this framework, the ACR is defined as the ratio of total equity in the banking sector (held by non-banks) to total end-borrower lending plus other non-bank assets.
At a particular point in time, the ratio is a single number. The microprudential regulator takes it as given.
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This glossary post was last updated: 5th May 2019.