Real Estate
Debt service coverage ratio
How many times over the income covers the debt.
The Formula
DSCR = NOI / ADS
How many times over the income covers the debt.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| DSCR | Coverage ratio | times | A value of 1 means income exactly covers debt. |
| NOI | Net operating income | currency per year | Income before financing. |
| ADS | Annual debt service | currency per year | Debt payments for the year. |
What Each Symbol Means
DSCRtimes
Coverage ratio
A value of 1 means income exactly covers debt.
NOIcurrency per year
Net operating income
Income before financing.
ADScurrency per year
Annual debt service
Debt payments for the year.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate debt service coverage page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Debt Service Coverage, filed under Finance. Every number the guide produces comes from substituting into this one line.