DSCR (Debt Service Coverage Ratio) - Meaning, Formula, Calculation & Interpretations
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- Опубліковано 9 лют 2025
- In this tutorial, you will learn how to examine an organization's Debt Service Coverage Ratio by understanding its meaning, formula, calculations, and interpretation. Additionally, you will also understand how to compute Colgate- Palmolive’s Debt Service Coverage Ratio in Excel.
You can download the Colgate Debt Service Coverage Ratio template from this link - tinyurl.com/co...
What is Debt Service Coverage Ratio?
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The Debt Service Coverage Ratio determines if a company's operating income is sufficient to cover all of its debt-related obligations in a given year. Debt servicing includes not only interest but also a percentage of the principal to be repaid each year. It also includes previously agreed-upon lease payments.
Formula
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DSCR Formula = Net Operating Income/Total Debt Service
Interpretation
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If the DSCR is less than 1.0, it indicates that the company’s operating cash flows are insufficient for Debt Servicing, signifying negative cash flows.
From a bank's perspective, the DSCR is a beneficial matrix, especially when giving loans against property.
For more details, you can refer to our article - www.wallstreet...
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Thank you, its very insightful
Glad it was helpful!
thanks a lot for this video.
Glad we're on the same page, cheers!
1:12 what is DSCR
Awesome Video
Very helpful and amazing video
Excellent,thanks
Glad you liked it!
thank you for the video.
Wouldn't you remove lease payments from EBITA (similar to interest) if you consider lease payments as part of the denominator?
If I consider Total Debt = (Total liabilities - Total Current Liabilities), is that the right understanding?
Its interest+principal of the loan
When post tax obligations is greater than non cash expense...pls explain that too...I have seen this concept in your web page but I didn't understand why non cash expense is added to interest (I understand why non cash expense is deducted from post tax obligation) when calculating debt service..Total Debt Service = Interest + Non Cash Expense + (Principal Repayment + Lease Repayment - Non Cash Expense) / (1-tax rate)
you dont differentiate between operating leases and capital leases. I suppose you only talk about capital leases because operating leases are already being discounted as an operating expense
Wrong formula.. Principal payment needs to be added to Numerator..
can you please explain why
Because that is part of debt servicing..
Wrong
write please, why is it wrong ?
Wrong