Debt Service Coverage Ratio
Ratio
Measures a company's ability to service its current debts with its current cash flow. A higher ratio means the company is more capable of meeting its debt obligations, reducing the risk for creditors.
Formula
Operating Income / Total Debt Service
Example
If a company has an operating income of $500,000 and debt obligations of $250,000, the Debt Service Coverage Ratio would be 2:1.