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Debt Coverage Ratio

Debt Coverage Ratio

In corporate finance, debt coverage ratio means the cash flow available to meet principle, interest and lease payments. In personal finance, it is the formula that loan officers use to determine the borrower's ability to pay back the debt.


The basic formula used is DSCR = (Annual Net Income + Amortization/Depreciation + Interest Expense + other non-cash and discretionary items (such as non-contractual management bonuses)) / (Principal Repayment + Interest payments + Lease payments

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