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Key takeaways. Debt-service coverage ratio (DSCR) looks at a company's cash flow versus its debts. The ratio is used when gauging a business's ability to pay off current loans and take on future ...
The debt service coverage ratio (DSCR), also known as "debt coverage ratio" (DCR), is a financial metric used to assess an entity's ability to generate enough cash to cover its debt service obligations, such as interest, principal, and lease payments. The DSCR is calculated by dividing the operating income by the total amount of debt service due.
Tax effects can be incorporated into this formula. For example, the WACC for a company financed by one type of shares with the total market value of and cost of equity and one type of bonds with the total market value of and cost of debt , in a country with corporate tax rate , is calculated as:
The total-debt-to-total-assets ratio is one of many financial metrics used to measure a company’s performance. In this case, the ratio shows how much of a company’s operations are funded by debt.
To calculate the firm's weighted cost of capital, we must first calculate the costs of the individual financing sources: Cost of Debt, Cost of Preference Capital, and Cost of Equity Cap. Calculation of WACC is an iterative procedure which requires estimation of the fair market value of equity capital [citation needed] if the company is not listed.
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