Free Debt Service Coverage Ratio Calculator
Calculate the debt service coverage ratio (DSCR) to determine whether operating income is sufficient to cover annual debt payments.
Debt Service Coverage Ratio
1.50
Debt Service Coverage Ratio vs Net Operating Income
How to Calculate Debt Service Coverage Ratio
Formula
DSCR = Net Operating Income / Annual Debt Service
DSCR measures whether a business earns enough operating income to comfortably cover its debt obligations (both principal and interest). A DSCR of 1.0 means income exactly equals debt payments -- no margin for error. Lenders typically require a minimum of 1.25 to provide a safety cushion for unexpected revenue dips.
Example Calculation
A company has $300,000 in net operating income and $200,000 in annual debt payments.
- 01DSCR = $300,000 / $200,000 = 1.50
- 02Surplus = $300,000 - $200,000 = $100,000
- 03The business earns $1.50 for every $1 of debt it must pay.
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