debt coverage ratio
Also found in: Acronyms.
Debt-Service Coverage Ratio
2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
debt coverage ratio (DCR)
The ratio of net operating income compared to annual debt service, which includes principal and interest payments. The ratio is used by lenders to evaluate loans on income-producing property.A ratio of 1.2 or better will usually support the extension of credit.
Annual revenues $100,000
– Annual operating expenses 50,000
Net operating income 50,000
Annual debt service on proposed loan 11,000
$50,000 ÷ $11,000 = DCR of 4.54