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 incomeOperating IncomeOperating income is the amount of revenue left after deducting the operational direct and indirect costs from sales revenue. to repay all its debt obligations, including repayment of principal and interest on both short-term and long-term debtLong Term DebtLong Term Debt (LTD) is any amount of outstanding debt a company holds that has a maturity of 12 months or longer. It is classified as a non-current liability on the company’s balance sheet. The time to maturity for LTD can range anywhere from 12 months to 30+ years and the types of debt can include bonds, mortgages. DSCR is often used when a company has any borrowings on its balance sheetBalance SheetThe balance sheet is one of the three fundamental financial statements. The financial statements are key to both financial modeling and accounting. such as bondsBondsBonds are fixed-income securities that are issued by corporations and governments to raise capital. The bond issuer borrows capital from the bondholder and makes fixed payments to them at a fixed (or variable) interest rate for a specified period., loans, and lines of credit. It is also a commonly used ratio in a leveraged buyoutLeveraged Buyout (LBO)A leveraged buyout (LBO) is a transaction where a business is acquired using debt as the main source of consideration. transaction to evaluate the debt capacity of the target company, along with other credit metrics such as total debt/EBITDADebt/EBITDA RatioThe net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio measures financial leverage and a company’s ability to pay off its debt. Essentially, the net debt to EBITDA ratio (debt/EBITDA) gives an indication as to how long a company would need to operate at its current level to pay off all its debt. multiple, net debt/EBITDA multiple, interest coverage ratioInterest Coverage RatioInterest Coverage Ratio (ICR) is a financial ratio that is used to determine the ability of a company to pay the interest on its outstanding debt. and fixed charge coverage ratioFixed-Charge Coverage Ratio (FCCR)The Fixed-Charge Coverage Ratio (FCCR) is a measure of a company’s ability to meet fixed-charge obligations such as interest and lease expenses..

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

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Debt Service Coverage Ratio Formula

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

Where:

• EBITDAEBITDAEBITDA or Earnings Before Interest, Tax, Depreciation, Amortization is a company's profits before any of these net deductions are made. EBITDA focuses on the operating decisions of a business because it looks at the business’ profitability from core operations before the impact of capital structure. Formula, examples = 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
• CapexCapital ExpenditureA capital expenditure (“CapEx” for short) is the payment with either cash or credit to purchase long term physical or fixed assets used in a = Capital Expenditure

Some companies might prefer to use the latter formula because capital expenditure is not expensed on the income statementIncome StatementThe Income Statement is one of a company's core financial statements that shows their profit and loss over a period of time. The profit or 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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