Debt Service Coverage Ratio Example

Debt Service Coverage Ratio Example. Debt service coverage ratio (dscr) example: It is calculated by dividing the company’s net operating income by its debt obligations for that particular year.

By dividing the $200,000 by $35,000, the company would show a debt coverage ratio of 5.71. The debt service coverage ratio (dscr) is defined as net operating income divided by total debt service. For example, suppose net operating income (noi) is $120,000 per year and total debt service is $100,000 per year.

The debt service coverage ratio (dscr) is an accounting ratio that measures the ability of a business to cover its debt payments.

The dscr is frequently used by lending institutions as part of. However, since their debt coverage ratio is below a 2, they may consider not giving the company a new loan. Company a has the following income: For example, if a company had a ratio of 1, that would mean that the company’s net operating profits equals its debt service obligations.