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متابعة

Explain the need of debt-service coverage ratio?

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تم إضافة السؤال من قبل Abdul Khalique , Finance Manager , Value Real Estate & Construction
تاريخ النشر: 2016/03/13
Moustafa Mahmoud Sharafeldeen Moustafa
من قبل Moustafa Mahmoud Sharafeldeen Moustafa , CFO , FAKHR INVESTMENT HOLDING CO

In corporate finance, the Debt-Service Coverage Ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year, including interest, principal, sinking-fund and lease payments.

a more relevant ratio is  cash flow to debt coverage ratio 

This coverage ratio compares a company's operating cash flow to its total debt, which, for purposes of this ratio, is defined as the sum of short-term borrowings, the current portion of long-term debt and long-term debt. This ratio provides an indication of a company's ability to cover total debt with its yearly cash flow from operations. The higher the percentage ratio, the better the company's ability to carry its total debt.

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