What Is the Debt-Service Coverage Ratio (DSCR)?

The debt-service coverage ratio applies to corporate, government, and personal finance. In the context of corporate finance, the debt-service coverage ratio (DSCR) is a measurement of a firm's available cash flow to pay current debt obligations. The DSCR shows investors whether a company has enough income to pay its debts.

 

KEY TAKEAWAYS

  • The debt-service coverage ratio (DSCR) is a measure of the cash flow available to pay current debt obligations.
  • DSCR is used to analyze firms, projects, or individual borrowers.
  • The minimum DSCR that a lender demands depends on macroeconomic conditions. If the economy is growing, lenders may be more forgiving of lower ratios.

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