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Debt Service Coverage Ratio Calculator

Compare operating income against debt service to test whether borrowings are comfortably serviceable.

About Debt Service Coverage Ratio Calculator

The ratio divides one figure by the other and is read against a conventional benchmark of 1.25. Both the ratio and its percentage form are shown, because different audiences expect different presentations of the same number. A coverage ratio compresses two absolute figures into one comparable number, which is what makes it usable across companies and periods of different size.

Formula

Debt Service Coverage Ratio

Debt Service Coverage Ratio = Net operating income ÷ Annual principal and interest payments

Net operating income
Numerator of the ratio
Annual principal and interest payments
Denominator of the ratio

Worked example

With the default values below, Debt Service Coverage Ratio Calculator returns Debt Service Coverage Ratio of 1.500. Change any input above and every figure here is recalculated in your browser.

Inputs used

Net operating incomeminimum 0
240,000
Annual principal and interest paymentsminimum 0
160,000

Results

Debt Service Coverage Ratio
1.500
Expressed as a Percentage
150.00%
Surplus Over the Benchmark
0.250
Inverse Ratio
0.667
Interpretation
Adequate — at or above the benchmark of 1.25

Step by step

  1. 1Values used
  2. 2Debt Service Coverage Ratio
  3. 3Debt Service Coverage Ratio= 1.500
  4. 4Expressed as a Percentage= 150.00
  5. 5Surplus Over the Benchmark= 0.250
  6. 6Inverse Ratio= 0.667
  7. 7Interpretation= Adequate — at or above the benchmark of 1.25

Assumptions and limits

  • The result is derived only from the 2 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Debt Service Coverage Ratio calculated?

Debt Service Coverage Ratio = Net operating income ÷ Annual principal and interest payments The ratio divides one figure by the other and is read against a conventional benchmark of 1.25. Both the ratio and its percentage form are shown, because different audiences expect different presentations of the same number.

Why does Debt Service Coverage Ratio matter?

A coverage ratio compresses two absolute figures into one comparable number, which is what makes it usable across companies and periods of different size.

What values do I need to enter?

This calculator takes 2 inputs: Net operating income, Annual principal and interest payments. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.

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