Calculation (formula)

The asset coverage ratio is calculated in three steps:

Step 1: The current liabilities are added up and short term debt obligations are subtracted

from this sum.

Step 2: The book value of tangible and monetary assets of a company is calculated by
subtracting the value of intangible assets (such as goodwill) from the book value of total assets.

The figure calculated in Step 1 is subtracted from this figure.

Step 3: The resulting figure of Step 2 is divided by the total outstanding debt of the company.

All of these three steps can be expressed in the following formula for asset coverage ratio.
Asset Coverage Ratio = ((Total Assets Intangible Assets) (Current Liabilities Short-term Debt)) /
Total Debt Obligations