# Coverage Ratio Diagram

Coverage Ratio Diagram diagram. This is one of the top business frameworks helping clients improve on their approach to strategy, project management, IT, HR, internal processes and client experience.

Common coverage ratios include the interest coverage ratio, debt service coverage ratio, and the asset coverage ratio. These coverage ratios are summarized below. The interest coverage ratio measures the ability of a company to pay the interest expense on its debt. The ratio, also known as the times interest earned ratio, is defined as:

Asset Coverage Ratio is calculated using the formula given below Asset Coverage Ratio (ACR) = (Total Tangible Assets – Short Term Liabilities) / Total Outstanding Debt Asset Coverage Ratio = 1.5

Debt Service Coverage Ratio = 0.676 Asset Coverage Ratio (ACR) = (Total Tangible Assets – Short Term Liabilities) / Total Outstanding Debt Asset Coverage Ratio = 0.678 Here is the step by step approach for calculating all 3 coverage Ratios. Step 1: EBIT Value is noted. EBIT is the Earnings before Interests and taxes value.