COVERAGE RATIO Definition

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COVERAGE RATIO is a measure of a corporations ability to meet a certain type of expense. In general, a high coverage ratio indicates a better ability to meet the expense in question. Examples: dividend coverage, fixed-charge coverage, interest coverage, preferred dividend coverage.

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PREPAYMENT RISK, in the area of mortgage-backed securities, which are backed by loans on property, is the possibility that home owners will payoff their mortgages early, returning the investor's principal earlier than expected. This typically occurs during a declining inter­est rate environment, when home owners can refinance at lower rates, leaving investors vulnerable to the risk of reinvestment at lower rates.

TOTAL LIABILITIES is all the obligations of the company, i.e. includes Total Current Liabilities, Long Term Debt, and any other miscellaneous liabilities the entity may have listed separately.

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