The debt coverage ratio is the ratio of the company's operating profit to its expenses. This ratio indicates its ability to cover its expenses using its profits from operations. If it is low, the company might encounter difficulties meeting financial expenses out of its current activities. A high ratio indicates relatively low expenses and a good financial position. The formula is stated as follows: Debt Coverage Ratio = Operating Profit / Finance Expenses
The ratio between an income property's annual net operating income and its annual debt service.
Net operating income divided by annual debt service. Used by lenders when analyzing income property loans.
The relationship between a property's Net Operating Income (NOI) and Annual Debt Service (ADS) [NOI divided by ADS]. This ratio is often used by lenders as a criterion for income property mortgage loans.
The relationship between a project's annual net operating income and the obligation to make principal and interest payments on borrowed funds. Debt coverage ratios are often employed to reduce lender's risk regarding mortgage loans.
A comparison of the net income of a property with the cost of payments (principal and interest) on the mortgage on the property, used to assess the ability of the property to generate enough income to pay for itself.
The ratio between the net operating income and the annual debt service (NOI ÷ ADS) Most lenders require a debt coverage ratio of at least 1.2 which means that the property generates 20 percent more net income than it needs to make its mortgage payments.
The ratio of the projected net income to debt service.
A ratio used in underwriting loans for income properties. Divide Net Operating Income by total debt service. Ratios of 1.20 and higher considered the norm. This is a real estate investing term commonly used by lenders.
The ratio of net yearly income to total yearly debt service.
In appraisal of income properties, a calculation of how well operating income is structured to make monthly mortgage payments. To calculate, net operating income is divided by the amount of debt service (principal and interest).
N.O.I. divided by debt service
DSCR or DCR Measures a mortgaged property's ability to cover monthly payments defined as the ratio of net operating income over the mortgage payments. A DSCR of less than 1.0 means that there is insufficient cash flow generated by the property to cover required debt payments.
Used by lenders, the relationship between net operating income and debt service.
Debt Coverage Ratio, also known as the debt service coverage ratio, is a popular benchmark used in the measurement of an income-producing property’s ability to produce enough revenue to cover its monthly mortgage payments. To calculate a property’s debt coverage ratio, you first need to determine the property’s net operating income. To do this you must take the property’s total income and deduct any vacancy amounts and all operating expenses.