Formula to calculate debt service coverage ratio:

Debt Service Coverage Ratio = net operating income / (interest + current portion of LTD)

Debt service coverage ratio definition and explanation:

The debt service coverage ratio is also known as the debt coverage ratio, debt service capacity ratio or DSCR.

The debt service coverage ratio shows the ability to meet annual interest and debt repayment obligations.

A debt service coverage ratio of less than 1:1 means that it does not have sufficient income to meet its debt demands.

 

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