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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.
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 financing.
The Loan life cover ratio (LLCR), similarly is the ratio of the net present value of the cash flow over the scheduled life of the loan to the outstanding debt balance in the period. Other ratios of this sort include: Cash flow available for debt service [clarification needed] Drawdown cover ratio; Historic debt service cover ratio
When the interest coverage ratio is smaller than one, the company is not generating enough cash from its operations EBIT to meet its interest obligations. The company would then have to either use cash on hand to make up the difference or borrow funds. Typically, it is a warning sign when interest coverage falls below 2.5x.
Interest coverage ratio, or ICR, is used to evaluate a company’s ability to pay the interest it owes on its debts. There is no generally agreed upon standard for what makes a healthy ICR across ...
For example, the debt-to-equity ratio and interest coverage ratios are supplemental ways to see how leveraged a company is. Remember that a high debt-to-assets ratio isn’t necessarily a bad thing.
A typical measurement of repayment ability is the debt service coverage ratio or DSCR. A credit analyst at a bank will measure the cash generated by a business (before interest expense and excluding depreciation and any other non-cash or extraordinary expenses).
For this example, divide your monthly debt payments ($2,400) by your total monthly gross income ($6,000). In this case, your total DTI would be 0.40, or 40 percent. To confirm your number, use a ...