Define the inputs before comparing.
Net investment income is an accounting income measure after applicable investment expenses; it is not a cash-flow statement. Payment-in-kind income can enter recognized income before cash is received. Use the amount included in the chosen NII, rather than the balance of PIK-bearing investments. Separate ordinary, supplemental and special common distributions instead of comparing earnings only with the smallest visible payment.
The calculation.
Total distributions = regular + supplemental + special. Regular coverage = NII / regular distributions. Total coverage = NII / total distributions. PIK/TII = PIK income / total investment income. PIK/NII is interpreted only if NII is positive. At deduction fraction f, sensitivity income = NII − PIK × f; coverage divides this hypothetical income by the matching distribution.
Formula version bdc-1.0.2. Decimal arithmetic uses 40 significant digits without intermediate display rounding. Arithmetic precision does not increase the accuracy of the source inputs. Display rounds half up to four decimal places; nonzero values smaller than 0.0001 retain five significant digits. Plain decimals are used through 24 fractional places; longer tiny values use scientific notation. Blank or unavailable inputs stay missing; zero denominators produce “Not defined” with a reason.
Reproduce the arithmetic.
Synthetic quarter, USD million: NII 120, included PIK 18, total investment income 180, regular distribution 100, supplemental 10 and special 5. Total distributions are 115. Regular coverage is 1.2000× and total coverage is 1.0435×. PIK/TII is 10.0000%, while PIK/NII is 15.0000%. At 25%/50%/100% PIK deductions, income is 115.5/111/102 and total coverage is 1.0043×/0.9652×/0.8870×. These are deliberately hypothetical inputs, not a company record.
How to use: find and match the inputs
Start with the statement of operations for NII and total investment income. Follow the investment-income accounting policy and PIK disclosure to establish what was recognized during the exact period. Find common distributions in the changes in net assets, distribution note and declarations. A cash-flow statement may show cash paid on a different timetable. Check declared versus paid basis and distinguish common from preferred distributions before copying values.
Record each source URL, accession if applicable, table or note location, original period and scale. Preserve the issuer definition. The source record below each result distinguishes manual entry from review: no reviewer or review date is invented.
Interpret the result with its denominator.
Regular coverage and total coverage are both useful because a supplemental distribution changes the denominator. Neither ratio establishes the tax character, sustainability or timing of cash payments. A negative NII produces signed negative coverage rather than a hidden zero. If supplemental or special distributions are unknown, leave them blank: total coverage remains undefined while regular coverage can still be calculated. An explicit zero is a separate user assumption.
Assumptions and limitations
Deducting PIK is a simple sensitivity, not cash earnings, operating cash flow or cash available for distributions. It holds expenses, incentive fees, taxes, collections and other noncash items constant. The 100% column is not a default or loss forecast. Total-amount mode avoids silently dividing PIK by current shares and comparing it with NII calculated using weighted-average shares. Reported and issuer-adjusted NII cannot be mixed. No recommendation, safety score or tax distribution test is generated.
No automatic currency, share-count, quarter/YTD or adjusted-to-reported conversion occurs. The common context is a user assertion, not evidence that pasted figures match. Check each original disclosure yourself; a manual input is not a verified company result.
Questions worth asking.
Why is an unknown supplement not zero?
Zero asserts there was no amount. A blank means the amount has not been established; the total cannot be completed without an assumption.
Can I use a paid distribution?
Yes, select paid and apply that basis to every distribution input. Paid cash can relate to an earlier declaration, so the time comparison needs explanation.
Primary sources and corrections.
- Investor.gov: publicly traded BDCs ↗
- SEC EDGAR: find the original filing ↗
- Issuer filing: PIK recognition and non-accrual accounting policy (definitions, not example data) ↗
Sources explain the definitions and disclosure context; the synthetic numbers above do not come from these issuers. See our editorial approach or submit a correction with the field, source location and reproducible calculation.