Ratio Calculation

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This discussion explains how to calculate the Debt Service Coverage Ratio (DSCR), a key financial metric. It clarifies that EBITDA is typically used as a proxy for cash flow. The standard formula provided is (EBITDA - Cash Taxes) / (Principal + Interest), with definitions for each component including current loan portions and interest payments.

Sanjay Budhiraja

Sanjay Budhiraja (Querist)
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05 October 2022 Hello All
Happy Dussehra!
Pl let me know how to calculate the DEBT SERVICE COVERAGE RATIO WITH EXAMPLES.
Let suppose my co's unsecured loans and secured loans are 100000/- then how to calculate the ratio . In operating Income what should I include.
Pl guide.
Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 October 2022 Debt Service Coverage is usually calculated using EBITDA as a proxy for cash flow. Adjustments will vary depending on the context of the analysis, but the most common DSCR formula is:

DSCR Formula =( EBITDA-(cash taxes)/(principal+interest )

Where:

EBITDA = Earnings Before Interest, Tax, Depreciation, and Amortization
Principal = The total amount of loan principal due within the measurement period (often expressed as the current portion of long-term debt or CPLTD).
Interest = The total aggregate amount of interest due within the measurement period, calculated on both the current portions and the non-current portions of long-term debt.
Cash Taxes = The proportion of total income tax that’s due in cash during the current measurement period.

Sanjay Budhiraja

Sanjay Budhiraja (Querist)
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05 October 2022 Sir
Thanks for the reply. But for further understanding Can u explain with example...
Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 October 2022 See the link

https://propertymetrics.com/blog/how-to-calculate-the-debt-service-coverage-ratio-dscr/

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