What is the meaning of Debt Service Coverage Ratio?


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Debt Service Coverage Ratio

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 Debt Service Coverage Ratio-

  • It is for financial projection which highlights only variables to the business which is particularly required for decision making.
  • The accountant should be in position to follow shortfall of cash flow payment of debt, process of interest on debt, for that purpose coverage ratio is utilize.
  • Coverage ratio is the part of the investor’s ratio which indicates that for payment of cost of capital how the profit will be utilized.
  • Hence it is the part which indicate the debt installment part required the how paid.

 

Debt service coverage Ratio=

NPBIT +NON CASH EXPENSES- TAX / DEBT INSTALLMENT + INTEREST

 

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