Debt Service Coverage Ratio Calculator
Debt Service Coverage Ratio Calculator: The Debt Service Coverage Ratio (DSCR) is a financial metric used to assess a company's ability to cover its debt obligations with its operating income. A DSCR greater than 1 indicates that a company has sufficient income to pay its debts, while a ratio below 1 signals potential financial trouble. Understanding and calculating DSCR is crucial for investors, lenders, and business owners to evaluate financial health and risk.
How to Use the Calculator: To use the Debt Service Coverage Ratio Calculator, input your Net Operating Income (NOI) and Total Debt Service (TDS) amounts into the designated fields. Click the "Calculate DSCR" button to obtain your ratio. If you want to clear the fields for a new calculation, click the "Clear" button. The result will indicate whether your income sufficiently covers your debt obligations.
DSCR Calculator
Debt Service
| Interest Rate (%/yr) | |
|---|---|
| Term | |
| Total Loan |
NOI Calculation
| Gross Rental Income | |
|---|---|
| Vacancy Rate (%) | |
| Operating Expenses (%) |
Results
| Loan Payment Result | |
|---|---|
| Total Loan Payment (Monthly) | |
| Total Loan Payment (Yearly) | |
| Debt Service Coverage Ratio Result | |
|---|---|
| NOI (Net Operating Income) | |
| DSCR | |
FAQs
What is a good DSCR?
A good DSCR is generally considered to be above 1.2. This indicates that a company can comfortably meet its debt obligations.
What does a DSCR below 1 mean?
A DSCR below 1 means that a company's net operating income is insufficient to cover its debt obligations, indicating potential financial distress.
Can DSCR be improved?
Yes, DSCR can be improved by increasing operating income, reducing debt levels, or both. This enhances a company's financial stability.
Is DSCR the only measure of financial health?
No, while DSCR is important, it should be considered alongside other metrics like current ratio, quick ratio, and profitability ratios for a complete view.
How often should DSCR be calculated?
It is advisable to calculate DSCR regularly, especially before taking on new debt or during financial assessments, to monitor financial health.
What is the formula for DSCR?
The formula for DSCR is: DSCR = Net Operating Income / Total Debt Service. This provides a straightforward assessment of cash flow against debt.
How do lenders use DSCR?
Lenders use DSCR to evaluate a borrower's ability to repay loans. A higher DSCR reduces perceived risk and can lead to better loan terms.
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