- Debt-Service Coverage Ratio - DSCR
- In corporate finance, it is the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments.
In government finance, it is the amount of export earnings needed to meet annual interest and principal payments on a country's external debts.
In personal finance, it is a ratio used by bank loan officers in determining income property loans. This ratio should ideally be over 1. That would mean the property is generating enough income to pay its debt obligations.
In general, it is calculated by:
A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1, say .95, would mean that there is only enough net operating income to cover 95% of annual debt payments. For example, in the context of personal finance, this would mean that the borrower would have to delve into his or her personal funds every month to keep the project afloat. Generally, lenders frown on a negative cash flow, but some allow it if the borrower has strong outside income.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
debt service coverage ratio — A simple comparison of the cash available to make principal and interest payments to the bank or to bond holders with the amount of those required principal and interest payments. Debt service coverage is expressed as a ratio with the annual net… … Financial and business terms
debt service coverage — ( DSC) The margin by which all of a borrower s or bond issuer s required principal payments (not just those for the loan under consideration or just those for loans to one bank) are exceeded by the sum of the firm s cash flow plus all of the… … Financial and business terms
debt coverage ratio — UK US noun [C] (ABBREVIATION DCR, also debt service coverage ratio, also debt service ratio) ► FINANCE a measurement used to decide whether a person, company, or country can afford to pay back a loan, calculated by dividing the income that is… … Financial and business terms
Debt service — may refer to: Interest payable on debt, especially on government debt Debt service ratio Debt service coverage ratio External debt Developing countries debt Credit analysis Bureau of the Public Debt … Wikipedia
Coverage Ratio — A measure of a company s ability to meet its financial obligations. In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders. The trend of coverage ratios over time is also… … Investment dictionary
Debt service ratio — In economics and government finance, debt service ratio is the ratio of debt service payments (principal + interest) of a country to that country’s export earnings. A country s international finances are healthier when this ratio is low. The… … Wikipedia
debt service ratio — ➔ ratio * * * The proportion of a country s export earnings needed to cover interest and principal repayments of its foreign debts, particularly those owed by the public sector. A level of 20 percent is normally considered an acceptable… … Financial and business terms
fixed-charge coverage ratio — A measure of a firm s ability to meet its fixed charge obligations: the ratio of (Earnings before interest, depreciation and amortization minus unfunded capital expenditures and distributions) divided by total debt service (annual principal and… … Financial and business terms
fixed charge coverage ratio — A measure of a firm s ability to meet its fixed charge obligations: the ratio of (Earnings before interest, depreciation and amortization minus unfunded capital expenditures and distributions) divided by total debt service (annual principal and… … Financial and business terms
EBITDA-To-Interest Coverage Ratio — A ratio that is used to assess a company s financial durability by examining whether it is at least profitably enough to pay off its interest expenses. A ratio greater than 1 indicates that the company has more than enough interest coverage to… … Investment dictionary
Debt Limitation — A bond covenant that limits or restricts any additional debt that may be incurred by the issuer. Debt limitations look to protect the current lenders by maintaining the firm s degree of leverage. A debt limitation may take a variety of forms,… … Investment dictionary