Debt Service Coverage Ratio

What is a debt service coverage ratio?

Debt Service Coverage Ratio Definition: This method of calculating available cash flow in companies, known as DSCR or the debt-service coverage ratio, is commonly used in corporate finance. It’s often used to analyze the amount of cash flow a company or corporation has, which is essential to investors to determine whether a business can pay off all its debts.

It’s a helpful way to calculate the financial position of individuals applying for a loan, small businesses, and projects requesting funding. A higher ratio is preferred, as this indicates sufficient funds to pay off debts, and a lower ratio means high debt obligations and insufficient cash to cover all expenses.

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