Measures whether a business generates enough operating income to cover its debt payments. Formula: EBITDA ÷ Annual Debt Service. A DSCR above 1.25 is typically required by lenders — below 1.0 means the business cannot cover its debt from operations.
How to interpret it
DSCR compares a defined cash-flow or earnings measure with scheduled debt service. Definitions vary by lender and model. The numerator must be checked before comparing with a lender requirement.
An illustrative $90,000 earnings proxy divided by $60,000 annual debt service is 1.50x, but this is not a lender-approved DSCR.
Where this connects to Impresa
You may encounter this concept when reviewing Financial Health. Start with the underlying inputs and check the applicable reporting period before interpreting the result.
Read the Financial Health guideDefinitions here explain the concept. Accounting treatments, formulas, and industry comparisons may vary. Use your own records and qualified advice for material decisions.