debt service coverage ratio

Definition

DSCR. A measurement of a property's ability to generate enough revenue to cover the cost of its mortgage payments. It is calculated by dividing the net operating income by the total debt service. For example, a property with a net operating income of $50,000 and a total debt service of $40,000 would have a debt service ratio of 1.25, meaning that it generates 25% more revenue than required to cover its debt payment.

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The debt service coverage ratio was a useful metric in determining if the project would be able to cover its liabilities.

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When looking at the quarterly financial statements, they wanted to make sure their debt service coverage ratio was at least 1.0 so they were breaking even.

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When he took out a half million dollar loan to construct his new factory, he was confident that the appeal of his product would skyrocket so that the debt service coverage ratio would not be a problem at all.

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