Debt Coverage

In the posting Why Debt Ratios Matter we looked briefly at what debt really is, one way of measuring it, and how the mix of debt and equity played a role in how appropriately a business was financed. Now let’s look at servicing debt, also known as debt coverage.

What Determines Debt Coverage?

Think about this from a personal perspective. Imagine you took out a loan to buy some furniture for your home, and it was one of those loans where you only paid interest for the first year. Starting in the second year you would be required to start Read the rest of this entry »


Why Debt Ratios Matter

If you don’t have a handle on your company’s debt you may find yourself without a company. Here are a few things to consider.

Types of Debt

There are two sources of capitalization for a company. One is owner equity and the other is debt. First let’s consider debt.

Debt may be in a number of forms, with bank loans to bonds being among them. An asset-based loan could be from a bank or other financing organization and Read the rest of this entry »


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