A printable cheatsheet with calculations
and notes

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Debt Service Coverage Ratio

Debt Service Coverage Ratio =

Net Operating Income

Debt Service

AKA: Debt Coverage Ratio:


The debt service coverage ratio is the operating income available to debt servicing for interest, principal, and lease payments.

Business owners, managers, and other interested parties use it to measure a company’s ability to repay its loans, take on new financing and make dividend payments.

Note: expanded calculation

Divide net operating income by debt service, including principal and interest.

= EBIT / (interest payments + principle payments + other obligations)


M&M calculated its debt-service coverage ratio to equal 1.25, which means the business can cover its debt 1.25 times over its current operating level. A 100% repayment.


A company’s DSCR depends on its industry, competitors, and growth stage.

Generally, a DSCR above 1.25 is a sign of financial strength. In contrast, ratios below 1.00 could indicate that a company may be in trouble and have difficulty producing enough cash to cover its debt payments.

Debt Service Coverage Ratio:


ROT: Rule of thumb
HA: Historical Average (organization’s historical average)
PG: Peer Group average
EB: Economic Benchmark

DISCLAIMER: The interactive calculators on this site are self-help tools intended to help you visualize and explore your financial information. They are not intended to replace the advice of a qualified professional. Because each business is different, we can not guarantee accuracy.