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