Debt Service Coverage Ratio (DSCR)

In the circumstances of corporate finance, the debt-service coverage ratio (DSCR) is the ratio of a firm’s existing cash flow to pay current debt obligations. The DSCR illustrates whether a real estate property generates adequate income to pay its debts.

 

Calculating DSCR: –

 

For calculating debt service coverage ratio net operating income and the total debt servicing of the entity are required.

DSCR = Net operating income / Total debt service

Where,

Net operating income is the difference between revenue and certain other expenses.

Total debt service is the current debt obligations

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