DSCR = Net Operating Income / Total Debt Service
Where total debt service is annual principal + interest payment to be made
DSCR ratio
gives an idea of whether the company can cover its debt-related obligations with the net operating income it generates.
If DSCR>1, it means that the company is generating enough operating income to cover all its debt-related obligations. A ratio of 2x or more would be ideal
If DSCR<1, it means that the net operating income generated by the company is not enough to cover all the debt-related obligations of the company.
