Asset coverage

Assets ratio (including asset coverage or funding ) is an economic indicator that in business the horizontal balance sheet structure studied. They, together with the liquidity degrees and the working capital , the key figures for the horizontal balance sheet structure.

General

In 1948, voices in business administration demanded that the useful life of an asset component and the term during which the capital used for financing ( equity and / or debt ) must be available. The somewhat complicated doctrine read: "There must be agreement between the duration of the commitment of the assets, i.e. the duration of the individual capital requirement, and the duration during which the capital used to cover the capital requirement is available". This is based on the idea that the debt tied up in a machine , for example, should only be due at a point in time when the accumulated depreciation amounts are sufficient to fully repay the tied debt when the machine leaves the company.

If all accounting processes are congruent, there will be no long-term liquidity problems ; according to Erich Gutenberg , the company is in financial equilibrium in the form of the golden rule of finance . He pointed out that financial equilibrium would keep the company going. The repayment date of a liability is then not before the release of the asset item financed with it.

A company's creditors and competitors therefore have an interest in assessing their risk or the competitive strength of the competition. The evaluation of the annual financial statements is essential for this. In order to determine the asset coverage, the fixed assets , equity and parts of the borrowed capital are required for the calculation.

Key figures

The key figures for the asset coverage are intended to provide information on whether the commitment of the capital employed in certain assets corresponds to generally recognized financing rules. In accordance with the principle of matching maturities, assets serving the company in the long term should also be financed by capital available over the long term.

Investment coverage I

When examining the long-term balance sheet items, first of all, equity is compared to fixed assets in asset coverage ratio I (also "coverage ratio A"):

${\displaystyle Anlagendeckungsgrad\,I={\frac {\text{Eigenkapital}}{\text{Anlagevermögen}}}}$

The golden rule of the balance sheet in the narrower sense means that the asset coverage ratio should be at least 100%, i.e. that the long-term fixed assets of the fixed assets should be fully financed by equity. This value is seldom reached in practice. A target quota of 50% to 70% is common today in the balance sheet analysis for the manufacturing industry.

Investment coverage II

The investment coverage ratio II (also "coverage ratio B", asset coverage ratio) shows the ratio of long-term available capital to fixed assets:

${\displaystyle Anlagendeckungsgrad\,II={\frac {{\text{Eigenkapital}}+{\text{langfristiges Fremdkapital}}}{\text{Anlagevermögen}}}}$

Since the long-term borrowed capital is also included in the calculation compared to the asset coverage ratio I , it can be determined to what extent the principle of maturity-congruent investment financing has been adhered to. If the value of 100% is exceeded, the golden balance rule is fulfilled in the broader sense , i.e. the fixed assets are financed entirely by equity and long-term debt.

Extended investment coverage

The extended asset coverage (also asset coverage level III) also includes parts of the current assets in the calculation. In order to be able to calculate the degree of asset coverage III, information about the so-called "iron stocks" is required. As this information is not available in most cases, the asset coverage ratio III is only rarely calculated. As a substitute, the entire stocks can be used:

${\displaystyle Erweiterte\,Anlagendeckung={\frac {Eigenkapital+{\text{langfristiges }}FK}{Anlageverm{\ddot {o}}gen+{\text{eiserne Bestände des }}UV}}}$

Here, too, a value of at least 100% should be achieved, so that fixed and current assets are fully financed by equity and long-term debt.

Validity of the key figures

It should be noted that these key figures do not apply to all sectors , but that there can be considerable differences depending on the economic sector . In the trade and services sector , these indicators are easier to maintain than in the capital-intensive heavy industry .

Individual evidence

1. ↑ Hans Töndury / Emil Gsell , Financing - Capital in Business Administration , 1948, p. 37 ff.
2. ↑ Erich Gutenberg, Fundamentals of Business Administration , Volume 3, The Finances, 1969, pp. 277 ff.
3. ↑ Erich Gutenberg, Fundamentals of Business Administration , Volume 3, The Finances, 1969, p. 280
4. ↑ Horst Tilo Beyer, Finanz-Lexikon , 1971, p. 22
5. ^ ^{A b} Siegfried Häberle (Hrsg.): The new lexicon of business administration . Oldenbourg Wissenschaftsverlag GmbH, Munich 2008, ISBN 978-3-486-58305-2 , p. 45 .
6. ↑ Bernd Heesen / Wolfgang Gruber, Balance Sheet Analysis and Key Figures , 2011, p. 156
7. ↑ Jörg Wöltje, Key Financial Figures and Company Valuation , 2012, p. 52
8. ↑ Manfred Weber: Business Calculations from A - Z . Haufe, Planegg / Munich 2005, ISBN 3-448-06778-4 , pp. 84 .