Debt service coverage ratio: Difference between revisions

Revision as of 19:06, 2 April 2025

Latest revision as of 00:49, 13 April 2025

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== Applications ==

The DSCR serves distinct purposes across contexts. In corporate settings, it assesses cash flow for debt obligations, while in personal finance, it evaluates borrowing capacity.<ref name="freedictionary2" /> In real estate, it’s a key indicator of property viability. During the late 1990s and early 2000s, banks often required a DSCR of at least 1.2,{{Citation needed|date=May 2024|reason=Does not have a reliable source}} though some accepted lower ratios, a practice linked to the [[2007–20082008 financial crisis]]. A DSCR above 1 indicates adequate cash flow, while below 1 signals potential shortfall. In project finance, a '''Debt Service Reserve Account''' ('''DSRA''') may offset periods where DSCR falls below 1.<ref name="Corality Financial Modelling2">{{cite web |title=Corality Debt Service Coverage Ratio Tutorial |url=http://www.corality.com/tutorials/dscr-debt-service-coverage-ratio |url-status=dead |archive-url=https://web.archive.org/web/20130718014413/http://www.corality.com/tutorials/dscr-debt-service-coverage-ratio |archive-date=2013-07-18 |access-date=2013-08-15}}</ref>

==Calculation==