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Investments glossary

Coverage Ratio Definition


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I\'m in favor of legalizing drugs. According to my values system, if people want to kill themselves, they have every right to do so. Most of the harm that comes from drugs is because they are illegal.

— Milton Friedman

A coverage ratio, broadly, is a group of measures of a company’s ability to service its debt and meet its financial obligations such as interests payments or dividends. The higher the coverage ratio, the easier it should be to make interest payments on its debt or pay dividends. The trend of coverage ratios over time is also studied by analysts and investors to ascertain the change in a company’s financial position.

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