Debt-service coverage ratio


Also found in: Dictionary, Medical, Encyclopedia.
Related to Debt-service coverage ratio: Fixed Charge Coverage Ratio

Debt-service coverage ratio

Earnings before interest and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate.

Debt-Service Coverage Ratio

1. In investment real estate, the ratio of annual net operating income on a piece of investment property to its annual debt service. Banks use the DSCR to help determine whether to make or refinance loans for investment property. A DSCR equal to or greater than 1 indicates that the debtor is able to service the debt on the income from the investment property. In personal finance, banks usually require a DSCR of at least 1 to make such a loan, while they generally expect a ratio of 1.2 for commercial projects.

2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
References in periodicals archive ?
market share; -- Minimum debt-service coverage ratios during the capacity and
The ratings reflect Guacolda's competitive dispatch position supported by the efficiency and geographical location of its units, sound operating and commercial strategies, long-term supply contracts, growing electricity demand in the region, and acceptable projected debt-service coverage ratios (DSCRs) under various stress scenarios.
Short-term rate increases affecting variable-rate debt would only modestly reduce debt-service coverage ratios for rated REITs, which are unlikely to have ratings implications except for those companies whose debt-service coverage ratios are already at the low end of their respective rating category,' said Tara Innes, Managing Director, Fitch Ratings.