Debt service coverage ratio (DSCR)

Unless explicitly defined otherwise, this is the ratio of cash flow to a company’s debt service (the amount of cash flow available to meet annual interest and principal payments on debt, including potential sinking fund payments) and thus a measure of the ability to service debt. A ratio of 1.3 means that cash flow in a period is thirty percent higher than the charges incurred in the same period for interest and principal payments on borrowed funds. – See asset-backed securities, debt management securitization.

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