Debt Service Coverage Ratio

This tutorial shows how to calculate the Debt Service Coverage Ratio (DSCR) in Excel

Excel

Debt Service Coverage Ratio in Excel

EXCEL FORMULA 1. Debt Service Coverage Ratio

EXCEL

Debt Service Coverage Ratio

=B5/C5

GENERIC FORMULA

=Net Operating Income/Debt Service

ARGUMENTS
Net Operating Income: The gross operating income minus operating expenses.
Debt Service: The cash required to cover the repayment of principle and interest on debt for a specific period.

EXPLANATION

The Debt Service Coverage Ratio (DSCR) is used to measure the ability of repaying debt obligations by using net operating income. The DSCR formula uses the Net Operating Income, which is the operating income minus operating expenses and is found on the Income Statement, divided by the Debt Service, which is includes the repayment of principle and interest for a specific period.

In this example we have a Net Operating Income of $1,000,000 with a Debt Service of $200,000 per annum, which derives with a DCSR of 5 ($1,000,000/$200,000).