Coverage Ratio

A company’s coverage ratio is a financial statistic that basically exposes the company’s ability to “cover” its debts. Coverage ratios provide a pretty simple idea of the health of a company.

Some similar figures include interest coverage and debt coverage ratios, both of which are pretty simple to calculate on your own if you can navigate the basic financial documents. If you own stock in a company that has a high coverage ratio, you should not have to worry about their ability to pay your dividends.