Glossary of Municipal Securities Terms

COVERAGE

The ratio of available revenues available annually to pay debt service over the annual debt service requirement. This ratio is one indication of the availability of revenues for payment of debt service. The formula for determining coverage, often referred to as “debt service coverage” or the “coverage ratio,” is as follows:

Coverage  =        Available Revenues     
                     Debt Service Requirement

EXAMPLE:

Coverage  =   $2,000,000   =  1.66  
                       $1,200,000   

See: ADDITIONAL BONDS COVENANT; DEBT SERVICE; PLEDGED REVENUES.

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