Cc/od interest

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Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2017 While calculating net operating income for calculating dscr,
*interest on debts is added back why?
However cc/OD interest is not added? Why

Kindly explain

Amol S Joglekar

Amol S Joglekar (Expert)
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22 August 2017 different people work out DSCR in different ways. There is NO any model or standard form of calculating the DSCR. It is always advisable to express the ratio and then show the calculations.

Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2017 Not satisfied with reply,

Anil Ahuja

Anil Ahuja (Expert)
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22 August 2017 Cc/is loan related to working capital of business which is a deductible expenditure even under income tax act. That's the reason we deduct it from net operating income n later we deduct income tax to arrive at PAT

K Srinivas, CMA CS

K Srinivas, CMA CS (Expert)
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22 August 2017 while arriving at net operating income, before all interest payment, we need to add back both interest paid on debts (loans and working capital).. it's prudent to do so.

K Srinivas, CMA CS

K Srinivas, CMA CS (Expert)
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22 August 2017 while arriving at operating income to calculate dscr iscr, it's prudent to add back interest on loans as well as interest on cc od

Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2017 Normally in finance line, it is not added back?, what is the reason

Amol S Joglekar

Amol S Joglekar (Expert)
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22 August 2017 There are 2 parts....
01. Debt Service Coverage Ratio
02. Interest Service Coverage Ratio
I think you have the query regarding ISCR rather than DSCR

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