Debt service coverage ratio example
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Interest coverage ratio...
Debt-Service Coverage Ratio (DSCR): How to Use and Calculate It
What Is the Debt-Service Coverage Ratio (DSCR)?
The debt-service coverage ratio (DSCR) measures a firm’s available cash flow to pay its current debt obligations.
What is debt service
The DSCR shows investors and lenders whether a company has enough income to pay its debts. The ratio is calculated by dividing net operating income by debt service, including principal and interest.
Key Takeaways
- The debt-service coverage ratio (DSCR) is a measure of the cash flow available to pay current debt obligations.
- The DSCR measures a business’s cash flow vs.
its debt obligations.
- Lenders use the DSCR to determine whether a business has enough net operating income to pay back loans.
- The DSCR equals net operating income divided by debt service, including principal and interest.
Understanding the Debt-Service Coverage Ratio (DSCR)
The debt-service coverage ratio is a widely used indicator of a company’s financial health, especially for companies that are highly leveraged with debt.
Debt service refers to the cash necessary to pay t
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