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Financial Terms | |
Asset-coverage test |
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Definition of Asset-coverage testAsset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to
Related Terms:ABC TestA test used to determine the status of an employee under a state unemployment Acid-test ratioAlso called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid ACID-TEST RATIOA ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula: Acid-test RatioSee quick ratio acid test ratio (also called the quick ratio)The sum of cash, accounts receivable, and short-term marketable Acquisition of assetsA merger or consolidation in which an acquirer purchases the selling firm's assets. AssetAny possession that has value in an exchange. ![]() AssetA resource, recorded through a transaction, that is expected to yield a benefit to a AssetSomething that is owned; a financial claim or a piece of property that is a store of value. AssetProbable future economic benefit that is obtained or controlled by an entity as a result of assetAnything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.). AssetAll things of value owned by an individual or organization. Asset activity ratiosRatios that measure how effectively the firm is managing its assets. Asset allocation decisionThe decision regarding how an institution's funds should be distributed among the Asset-Backed SecuritiesBond or note secured by assets of company. Asset-backed securityA security that is collateralized by loans, leases, receivables, or installment contracts ![]() Asset-based financingMethods of financing in which lenders and equity investors look principally to the Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. Asset classesCategories of assets, such as stocks, bonds, real estate and foreign securities. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset/equity ratioThe ratio of total assets to stockholder equity. Asset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another Asset/liability managementAlso called surplus management, the task of managing funds of a financial asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Asset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital asset Pricing Model (CAPM), that determines the required Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Asset substitutionA firm's investing in assets that are riskier than those that the debtholders expected. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Asset swapAn interest rate swap used to alter the cash flow characteristics of an institution's assets so as to Asset turnoverThe ratio of net sales to total assets. asset turnovera ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets asset turnover ratioA broad-gauge ratio computed by dividing annual AssetsA firm's productive resources. ASSETSAnything of value that a company owns. AssetsThings that the business owns. AssetsItems owned by the company or expenses that have been paid for but have not been used up. Assets requirementsA common element of a financial plan that describes projected capital spending and the Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization capital assetan asset used to generate revenues or cost savings Capital assetA fixed asset, something that is expected to have long-term usage within Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized againstfuture-period revenue. Cash flow coverage ratioThe number of times that financial obligations (for interest, principal payments, Contra-asset accountAn offset to an asset account that reduces the balance of the asset account. Coverage ratiosRatios used to test the adequacy of cash flows generated through earnings for purposes of Current assetTypically the cash, accounts receivable, and inventory accounts on the Current assetsValue of cash, accounts receivable, inventories, marketable securities and other assets that Current assetsCash, things that will be converted into cash within a year (such as accounts receivable), and inventory. Current assetsAmounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments. current assetsCurrent refers to cash and those assets that will be turned Current AssetsCash and other company assets that can be readily turned into cash within one year. Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Dynamic asset allocationAn asset allocation strategy in which the asset mix is mechanistically shifted in Exchange of assetsAcquisition of another company by purchase of its assets in exchange for cash or stock. Fair-and-equitable testA set of requirements for a plan of reorganization to be approved by the bankruptcy court. Financial assetsClaims on real assets. financial assetsClaims to the income generated by real assets. Also called securities. First To Die CoverageThis means that there are two or more life insured on the same policy but the death benefit is paid out on the first death only. If two or more persons at the same address are purchasing life insurance at the same time, it is wise to compare the cost of this kind of coverage with individual policies having a multiple policy discount. Fixed assetLong-lived property owned by a firm that is used by a firm in the production of its income. Fixed assetAn item with a longevity greater than one year, and which exceeds a company’s Fixed asset turnover ratioThe ratio of sales to fixed assets. Fixed assetsThings that the business owns and are part of the business infrastructure – fixed assets may be fixed assetsAn informal term that refers to the variety of long-term operating Fixed AssetsLand, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation. Fixed Assets Turnover RatioA measure of the utilization of a company's fixed assets to Fixed-charge coverage ratioA measure of a firm's ability to meet its fixed-charge obligations: the ratio of Fixed Charge Coverage RatioA measure of how well a company is able to meet its fixed Incontestable ClauseThis clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prevented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy. Intangible assetA legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual Intangible assetA nonphysical asset with a life greater than one year. Examples are Intangible assetsassets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises. Intangible fixed assetsNon-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks). Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's IntestateThis means dying without a will, in which case the provincial laws of the province in which the death occurred apply to the manner in which assets will be distributed. In other words, if you don't write your own will, the government will do it for you after your death and it may not be as you would have wished. Last To Die CoverageThis means that there are two or more life insured on the same policy but the death benefit is paid out on the last person to die. The cost of this type of coverage is much less than a first to die policy and it is generally used to protect estate value for children where there might be substantial capital gains taxes due upon the death of the last parent. This kind of policy is also valuable when one of two people covered has health problems which would prohibit obtaining individual coverage. Limitation on asset dispositionsA bond covenant that restricts in some way a firm's ability to sell major assets. Liquid assetasset that is easily and cheaply turned into cash - notably cash itself and short-term securities. Long-term assetsValue of property, equipment and other capital assets minus the depreciation. This is an Longer-Term Fixed Assetsassets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied. net asset valueThe value of all the holdings of a mutual fund, less the fund's liabilities. Net asset value (NAV)The value of a fund's investments. For a mutual fund, the net asset value per share Net assetsThe difference between total assets on the one hand and current liabilities and noncapitalized longterm Non-reproducible assetsA tangible asset with unique physical properties, like a parcel of land, a mine, or a Other assetsA cluster of accounts that are listed after fixed assets on the balance sheet, Other current assetsValue of non-cash assets, including prepaid expenses and accounts receivable, due Personal Assetsassets, the title of which are held personally rather than in the name of some other legal entity. Policy asset allocationA long-term asset allocation method, in which the investor seeks to assess an Preferred Stock Stock that has a claim on assets and dividends of a corporation that are priorto that of common stock. Preferred stock typically does not carry the right to vote. Proxy contestA battle for the control of a firm in which the dissident group seeks, from the firm's other proxy contestTakeover attempt in which outsiders compete with management for shareholders’ votes. Also called proxy fight. Publicly traded assetsassets that can be traded in a public market, such as the stock market. Quick assetAny asset that can be converted into cash on short notice. This is a subset Quick assetsCurrent assets minus inventories. RATE OF RETURN ON TOTAL ASSETSThe percentage return or profit that management made on each dollar of assets. The formula is: Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |