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Debt cover is defined as the ratio of a company’s total assets to its debt.

Advantages:
Debt cover is a useful measure of financial strength. It can indicate not only what the debt cover was at a particular point in time, but also how much it has changed since it was last evaluated. It is thus a way of assessing a company’s financial quality and associated risk levels.


Disadvantages:
Debt cover should never be used as the sole metric test of a company’s financial soundness. Only if you have access to the current books can you know if there are otherwise unknown changes in a company’s financial situation. Use other metrics in conjunction, such as the interest coverage ratio, to gain a fuller picture.

13 years ago. Rating: 0
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