Compare operating income against debt service to test whether borrowings are comfortably serviceable.
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.
Debt Service Coverage Ratio
Debt Service Coverage Ratio = Net operating income ÷ Annual principal and interest payments
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.
A coverage ratio compresses two absolute figures into one comparable number, which is what makes it usable across companies and periods of different size.
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.