The Debt Service Coverage Ratio determines the repayment capacity of the borrowing party. The higher this ratio, the better the debt-paying capacity of the borrower. It shows the quantum of surplus cash available with the organization for meeting its debt requirements, such as interest and principal amount. Organizations having higher DSCR can ask for better terms of the loan, such as lower interest rates, less collateral security, and more.
To calculate DSCR, the formula is:
DSCR = Net Operating Income/Debt services
Where, calculation of Net Operating Income & Debt Services is done as:
Net Operating Income = PAT + Interest + Depreciation + Non-cash expenses
& Debt Services = Installment amount (Interest + Principal repayment during the year)
Debt Service Coverage Ratio Calculator
How to Calculate using a Calculator?
You simply have to provide the following data to the calculator.
Net Operating Income – The amount of net operating income can be derived from the financial statements of the organization.
Debt Services – The amount of debt services of the organization, i.e., the borrowings of the organization, can easily be obtained from the Income & Expenditure Statement and Balance Sheet of the organization.
Excel Calculator – Debt Service Coverage Ratio
You can also download our excel based calculator for Debt Service Coverage Ratio.
Excel Calculator for Debt Service Coverage Ratio (18 downloads )