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Debt Service Coverage Ratio (DSCR) Calculator

Calculate the Debt Service Coverage Ratio (DSCR) to assess cash flow available for debt service.

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Calculation Parameters

Specify your inputs below.

Net Operating Income (NOI) ($)

Total Debt Service (Principal + Interest) ($)

Calculated Result

Debt Service Coverage Ratio (DSCR) 1.25

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Expert Tip

A DSCR of 1.25 is a common minimum requirement for commercial real estate lenders, leaving a 25% safety margin.

How this Calculator Works

This calculator computes the Debt Service Coverage Ratio (DSCR), which measures the net operating income available to cover annual debt interest and principal payments. Lenders use this to determine commercial loan sizes and borrowing risk. A DSCR above 1.0 indicates positive cash flow to pay debt.

Formula & Methodology

DSCR = Net Operating Income / Total Debt Service - Net Operating Income (NOI) is the earnings before interest, taxes, depreciation, and amortization (EBITDA), minus capital expenditures. - Total Debt Service is the sum of annual principal and interest payments.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

A business has a Net Operating Income of $150,000, and its annual loan principal and interest payments sum to $100,000. 1. Divide Net Operating Income by Total Debt Service: $150,000 / $100,000 = 1.50. Result: The DSCR is 1.50, meaning the company earns 50% more than needed to cover its debt payments.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This fixed income and debt investment calculator analyzes bond pricing, coupon yield to maturity (YTM), Macaulay/modified duration, credit risk spreads, and debt coverage ratios based on Wall Street fixed income analytics.

Variable Glossary

Input

Fixed Income Data

Par value ($1,000), coupon rate %, payment frequency, maturity years, corporate credit spread, or tax rate %.

Parameter

Bond Performance

Yield to Maturity (YTM %), present bond price ($), modified duration (years), or Tax-Equivalent Yield (TEY).

How to Calculate Step-by-Step

Step 1

Input bond face value, annual coupon interest rate, or corporate credit default swap (CDS) basis points.

Step 2

Select payment schedule frequency (annual, semi-annual) and years remaining until maturity date.

Step 3

Review calculated yield to call/maturity, interest rate sensitivity duration, or debt service coverage (DSCR).

FAQ

How does bond duration measure interest rate risk?

Modified duration estimates the approximate percentage change in a bond's price for a 1% (100 bps) shift in interest rates. Higher duration indicates greater price sensitivity to rate moves.

What is Tax-Equivalent Yield (TEY) for municipal bonds?

Tax-Equivalent Yield = Municipal Tax-Exempt Yield / (1 - Marginal Tax Rate). It shows the pre-tax yield a taxable bond would need to equal the after-tax yield of a tax-free municipal bond.

Can fixed income calculators guarantee bond trading outcomes?

No. Bond pricing models assume clean compounding yields and fixed reinvestment rates. Secondary market prices fluctuate based on liquidity, credit rating revisions, and market interest rate movements.