Debt Service Coverage Ratio (DSCR)

The Debt Service Coverage Ratio (DSCR) is a financial metric used to evaluate a company's ability to pay its debts. It compares the company's net operating income (money earned from business operations) to its total debt obligations (interest and principal repayments). A DSCR greater than 1 indicates the company generates enough income to cover its debt payments, while a ratio below 1 suggests it may struggle to meet its obligations. Essentially, the DSCR helps lenders and investors assess the financial health and sustainability of a business in managing its debts.