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Simple English definitions for legal terms

asset-coverage test

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A quick definition of asset-coverage test:

Asset-Coverage Test: A rule that says a company can only borrow more money if they have enough assets (like buildings or equipment) to cover their debts. The test sets a minimum ratio of assets to debt that the company must maintain in order to borrow more money.

A more thorough explanation:

An asset-coverage test is a restriction in a bond-indenture that allows a company to borrow more money only if the ratio of its assets to debt does not fall below a certain minimum. This test is used to ensure that a company has enough assets to cover its debts and can continue to pay its creditors.

Let's say a company has $10 million in assets and $5 million in long-term debt. The asset-coverage ratio would be 2:1 ($10 million divided by $5 million). If the bond-indenture requires a minimum asset-coverage ratio of 1.5:1, the company would be allowed to borrow more money as long as its assets remain above $7.5 million (1.5 times its long-term debt).

Another example would be a company that has $20 million in assets and $10 million in long-term debt. The asset-coverage ratio would be 2:1 ($20 million divided by $10 million). If the bond-indenture requires a minimum asset-coverage ratio of 2:1, the company would not be allowed to borrow more money until it increases its assets or reduces its debt.

These examples illustrate how the asset-coverage test works. It ensures that a company has enough assets to cover its debts and can continue to pay its creditors. If a company's asset-coverage ratio falls below the minimum required by the bond-indenture, it may be a sign that the company is in financial trouble and may not be able to meet its obligations.

asset-based financing | asset-depreciation range

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18:46
do u have a dream school?
18:46
well i saw one is at fordham and one is at upenn and ik fordham isnt t14 but its better than temple and villanova
18:47
dream is duke
18:47
ooh interesting choice why Duke?
18:48
i got into fordham and so did the dumbass I was dating for like two months it’s not that hard
18:48
by which I mean if they let him in I don’t trust their standards
18:49
my dad went to duke law so i have been a fan forever
18:49
Duke is fun. I took a trip there when I was 19 or so. Really good time when I was a young rapscallion.
18:49
and ik i just dont think i gave myself enough time for a guaranteed 170+ performance
18:49
I didnt see if anyone answered my UGA question. Did anyone answer it?
18:53
@Dkkm11: are you not still a young rapscallion?
19:00
Nah, I am gray-bearded wizard.
19:02
Hmmm. I guess that’s okay.
19:03
Honestly, idk what I would call myself these days. Will probably not know until I can reflect on this part of my life which will be idk, in like 5 years when I am 32.
19:06
Does your life come in 5 year epochs typically?
19:06
Someone told me a while ago that I was probably molested as a kid because I don’t really have any clear memories of my childhood. But I don’t think I was.
1a2b3c4d26z
19:10
Inside thoughts!
19:10
this is where I post my inside thoughts
19:11
Nah, the fucked up thing about therapists is they try and make you think your parents are your enemy 99% of the time and really they should be telling you that your parents have almost no effect on the rest of your life. If they can get you to keep focusing on your parents they can keep making money.
19:12
Yeah, my life really does flow in about 5 years periods.
19:12
My crypto also flows in 5 day epochs too.
19:16
what do you do with your days as an unemployed crypto guy? do you play an instrument or something
19:47
please lawd
19:47
forgive me
19:47
its time to go back to tha old me
19:50
this is what i feel like when i get one single drill question right
19:50
when u get one wrong ;(
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