Business Finance Calculator
DSCR Calculator — Debt Service Coverage Ratio
Calculate Debt Service Coverage Ratio using the cash accrual and debt-service figures you enter, and understand what the resulting ratio represents.
Enter Figures
Enter principal repayment / current maturity of term debt for the period being analysed.
Understanding DSCR
What Is DSCR?
DSCR stands for Debt Service Coverage Ratio. It broadly measures whether the cash generated by a business is sufficient to service its debt obligations. A DSCR above 1.0x means the business generates more cash than required for debt service based on the entered figures. A DSCR below 1.0x means the entered cash accrual is insufficient to cover the entered debt-service requirement.
DSCR Formula
DSCR = Cash Available for Debt Service ÷ Total Debt Service
Cash Available for Debt Service (CADS)
= Net Cash Accrual
+ Interest & Finance Charges
Total Debt Service (TDS)
= Principal Repayment / Current LT Debt Service
+ Interest & Finance Charges
This calculator uses the figures you enter. It does not apply any lender-specific adjustments to income or debt service.
Understanding Cash Available for Debt Service
Cash Available for Debt Service (CADS) represents the cash generated by the business that is available to service debt. It is calculated as Net Cash Accrual plus Interest & Finance Charges. Adding back interest reflects that interest is itself part of debt service and should not be deducted before the ratio is calculated.
Understanding Total Debt Service
Total Debt Service (TDS) represents the total debt-service obligation for the period. It includes Principal Repayment (or current long-term debt service) and Interest & Finance Charges. Both components must be covered by the available cash.
Why Lenders Analyse DSCR
Lenders use DSCR to assess whether a business can service its debt from its own cash generation. A higher DSCR provides a larger cushion above the minimum required to service debt. However, DSCR is one of several factors in a credit assessment. Lenders also consider the nature of the business, security, management quality, industry conditions and other factors.
Single-Year vs Multi-Year DSCR
A single-year DSCR reflects the ratio for one period. Multi-year analysis allows a lender to assess consistency and trend. A business may show a strong DSCR in one year but weaker performance in others. The aggregate DSCR across multiple years uses total CADS divided by total TDS — it is not a simple average of yearly ratios, which would give equal weight to each year regardless of the absolute figures.
Why DSCR Can Differ Between Assessments
Different lenders may define Net Cash Accrual differently (e.g. PAT + Depreciation, or a different cash-accrual definition), include or exclude certain finance charges, use different debt-service figures, and apply different minimum DSCR thresholds. This calculator uses a transparent cash-accrual/debt-service approach based only on the figures you enter.
Frequently Asked Questions
01What is a good DSCR?
A higher DSCR mathematically represents greater cash coverage of the entered debt-service requirement. However, acceptable DSCR levels vary by lender, facility type, borrower profile, industry and assessment methodology. This calculator does not classify results as good, bad, eligible or ineligible, and does not state a universal approval threshold.
02Why does the formula add back interest to both CADS and TDS?
Because interest is part of debt service. If interest were deducted from cash accrual before the ratio is calculated, it would be counted twice — once as a deduction from cash and once as part of debt service. Adding it back to cash accrual ensures the ratio correctly measures whether total cash covers total debt service.
03What is Net Cash Accrual?
Net Cash Accrual is broadly the cash generated by the business after accounting for operating expenses and taxes but before debt service. Common definitions include Profit After Tax plus Depreciation and Amortisation. The exact definition used by a lender may differ.
04Can I use this for a home loan or personal loan?
DSCR is primarily used for business loan assessments. For personal loans and home loans, lenders typically use FOIR (Fixed Obligations to Income Ratio) rather than DSCR.
05Why does the multi-year aggregate use total CADS divided by total TDS rather than averaging yearly ratios?
Averaging yearly ratios gives equal weight to each year regardless of the absolute figures. A year with very small figures would have the same weight as a year with large figures. The aggregate approach uses total cash and total debt service across all entered years, which is a more representative measure of overall coverage.