Debt service coverage ratio: Difference between revisions

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The '''debt service coverage ratio''' ('''DSCR'''), 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 servicing|debt service]] obligations. These obligations include interest, principal, and lease payments. The DSCR is calculated by dividing the operating income available for debt service by the total amount of debt service due.

The DSCR is widely used as a [[Benchmarking|benchmark]] to measure the ability of an individual or corporation to meet their debt obligations. A higher DSCR indicates that an entity has a greater ability to service theirits debts, making it easier for themit to obtain loans. Banks and lenders often use a minimum DSCR ratio as a loan condition in the covenant, and breachinga this covenantbreach can sometimes be considered an act of [[Default (finance)|default]]. It's an important metric for measuring an entity's financial health and its ability to meet its debt obligations.

==Uses==