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.