Asset Coverage Ratio
Calculate the asset coverage ratio, a solvency ratio that measures how well a company’s tangible assets, after settling non-debt current liabilities, can cover its total debt.
This ratio is commonly used by lenders and bondholders to assess the extent to which a company’s hard (tangible) assets would be available to repay debt obligations in a liquidation scenario, since intangible assets (e.g. goodwill) typically have little to no recovery value and non-debt current liabilities are assumed to be settled first out of current assets. Short-term debt is netted out of current liabilities before subtracting, since it is already captured in total debt and would otherwise be double-counted.
The formula is as follows:
\[\text{Asset Coverage Ratio} = \left[(\text{Total Assets} - \text{Intangible Assets}) - (\text{Total Current Liabilities} - \text{Short Term Debt})\right] / \text{Total Debt}\]Asset Coverage Ratio in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_asset_coverage_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["KMI", "WMB", "OKE"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_asset_coverage_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
How many times did the tangible assets of Kinder Morgan, Williams Companies and ONEOK, net of their non-debt current liabilities, cover their debt from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| KMI | 1.9926 | 2.0029 | 2.0193 | 2.0582 | 2.1545 |
| OKE | 1.5362 | 1.6077 | 1.8371 | 1.7765 | 1.8112 |
| WMB | 1.5739 | 1.6223 | 1.6147 | 1.649 | 1.6245 |
Parameters
get_asset_coverage_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data). | 4 |