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Debt Service Coverage Ratio Template

Debt Service Coverage Ratio Template

Debt Service Coverage Ratio (DSCR) measures the ability of a company to use its operating income to repay all its debt obligations, including repayment of principal and interest on both short-term and long-term debt. DSCR is often used when a company has any borrowings on its balance sheet such as bonds, loans, and lines of credit. It is also a commonly used ratio in a leveraged buyout transaction to evaluate the debt capacity of the target company, along with other credit metrics such as total debt/EBITDA multiple, net debt/EBITDA multiple, interest coverage ratio and fixed charge coverage ratio.

This debt service coverage ratio template built in Excel will help you calculate the debt service coverage ratio, both including and excluding capex.

 

Debt Service Coverage Ratio Template Screenshot

 

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Debt Service Coverage Ratio Template

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Debt Service Coverage Ratio Formula

There are two ways to calculate the debt service coverage ratio:

 

 

Debt Service Coverage Ratio Formula

 

Where:

  • EBITDA = Earnings Before Interest, Tax, Depreciation and Amortization
  • Principal = the total amount of short-term and long-term borrowings
  • Interest = the interest payable on any borrowings
  • Capex = Capital Expenditure

Some companies might prefer to use the latter formula because capital expenditure is not expensed on the income statement but rather considered as an “investment”. Excluding Capex from EBITDA will give the company the actual amount of operating income available for debt repayment.

 

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