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→Calculation: changed the formula for debt servicing ratio; provided explanation; provided a reference. The previous formula and description were completely off. |
m →Calculation: typo with ref tag |
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:<math>\text{Net Operating Income} = \text{Gross Operating Revenue} - \text{Operating Expenses} </math>
:<math>\text{Debt Service} = \text{Principal Repayment} + \text{Interest Payments} + \text{Lease Payments} </math> <ref>https://propertymetrics.com/blog/how-to-calculate-the-debt-service-coverage-ratio-dscr/<
To calculate an entity's debt coverage ratio, you first need to determine the entity's [[net operating income]] (NOI). NOI is the difference between gross revenue and operating expenses. NOI is meant to reflect the true income of an entity or an operation. Thus, not included in operating expenses are financing costs (e.g. interests from loans), personal income tax of owners/investors, capital expenditure and depreciation.
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