FIXED ASSET COVERAGE RATIO
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ON VERIFYING DPR banks may verify what is FIXED ASSET COVERATEW RATIO. Whether the ratio is within the eligible limit. It is the ratio between TOTAL FIXED ASSET AND TOTAL DEBT. tHE MOTIVE BEHIND CALCULTING THIS RATIO IS to see that the fixed asset can provide sufficient coverage for total debt of the company. It is a security concern for lending bank also.
The fixed ASSET available with the company must be sufficient to cover the total debt. The eligible ratio is between 1.5 to 2.
Example: If total debt is Rs. 10,00,000 there should have minimum of 15,00,000 worth fixed assets.
The bank benchmark for fixed assets coverage ratio is minimum of 1.2