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How do you calculate debt to service ratio?


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Answered 2007-09-03 19:28:56

Debt Service Ratio and Debt Coverage Ratio mean the same thing.

To calculate,

* Add back any interest expense to get 'Cashflow Available to Pay Debt'. * Divide Cashflow Available to Pay Debt' by the debt payments for the period. * An answer of 1.0 or better means there is just enough cashflow to cover the debt. * Most lenders want to see 1.2 to 1.3 for a business Example:

Net Income for the year

$5,000 after a deduction of $10,000 interest expense.

Debt payments of $1,200 per month. ($1,200 x 12 =$14,400 per year)

Cashflow Available to pay Debt

$5,000 plus $10,000 equals $15,000.

Debt Service Ratio:

$15,000/$14,400

1.04

Probably not enough to keep the commercial lenders happy.

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Debt Service Coverage Ratio = Interest payable on debt/Net Profit


It’s a ratio among Net Operating Income and the debt service. It's used to determine profitability after paying debt service.


Net operating Income/Total debt service Total debt servide-cash reuired to pay out interest as well as principal on a debt Net operating Income/Total debt service Total debt servide-cash reuired to pay out interest as well as principal on a debt



Debt Ratios measure the company's ability to repay its long-term debt commitments. They are used to calculate the company's financial leverage. Leverage refers to the amount of money borrowed in order to maintain the stable/steady operation of the organization.The Ratios that fall under this category are:1. Debt Ratio2. Debt to Equity Ratio3. Interest Coverage Ratio4. Debt Service Coverage RatioDebt Ratio:Debt Ratio is a ratio that indicates the percentage of a company's assets that are provided through debt. Companies try to maintain this ratio to be as low as possible because a higher debt ratio means that there is a greater risk associated with its operation.Formula:Debt Ratio = Total Liability / Total Assets


Debt Service Coverage Ratio


Money-zine (www.money-zine.com) hosts a debt ratio calculator on their website. Simply complete the online form, click on the Calculate button and your debt ratio is instantly provided.


Texas Ratio FormulaTo calculate the Texas Ratio, you divide a bank's bad debt on the books by the amount of money it has to absorb the bad debt.



Debt RatioFor a company, the debt ratio indicates the relationship between capital supplied by outsiders and capital supplied by shareholders. Often the debt ratio is computed as total debt (both current and long-term) divided by total assets. Thus if a company has $50,000 in debt and assets of $100,000, its debt ratio is 50%. The debt ratio is also calculated as total debt/shareholders' equity, long-term debt/shareholders' equity, and in other ways. However computed, the debt ratio provides insight into the firm's capital structure and will vary across industries. A low debt ratio isn't necessarily best: If a company can earn a greater return on debt than its cost, the firm should borrow more and raise its debt ratio -- provided the debt burden won't be crushing when business slows. Turning to consumers, the debt ratio is often shorthand for the "debt to income" ratio, i.e., an individual's monthly minimum debt payments divided by monthly gross income. The debt ratio is monitored by credit card companies and determines the consumer's ability to obtain additional creditDebt Ratios measure the company's ability to repay its long-term debt commitments. They are used to calculate the company's financial leverage. Leverage refers to the amount of money borrowed in order to maintain the stable/steady operation of the organization.The Ratios that fall under this category are:1. Debt Ratio2. Debt to Equity Ratio3. Interest Coverage Ratio4. Debt Service Coverage RatioDebt Ratio:Debt Ratio is a ratio that indicates the percentage of a company's assets that are provided through debt. Companies try to maintain this ratio to be as low as possible because a higher debt ratio means that there is a greater risk associated with its operation.Formula:Debt Ratio = Total Liability / Total Assets


Debt ratio to determine the strength of a companies financial strength is calculated by taking all the companies debts and dividing it by total assets.


It can as long as the cosigner doesn't have a lot of debt.The lender will add the income and debts of all parties on the loan application to calculate the total debt to income ratio.


What is given is: total assets = $422,235,811 Debt ratio = 29.5% Find: debt-to-equity ratio Equity multiplier Debt-to-equity ratio = total debt / total equity Total debt ratio = total debt / total assets Total debt = total debt ratio x total assets = 0.295 x 422,235,811 = 124,559,564.2 Total assets = total equity + total debt Total equity = total assets - total debt = 422,235,811 - 124,559,564.2 = 297,676,246.8 Debt-to-equity ratio = total debt / total equity = 124,559,564.2 / 297,676,246.8 = 0.4184 Equity multiplier = total assets / total equity = 422,235,811 / 297,676,246.8 = 1.418


The answer will vary based on the lender, the loan terms including interest rate and other variables. There is no one answer. The debt service to income ratio provides an indication and can be an easy way to screen in or out specific loan programs. Most commercial transactions will look for a debt service coverage ratio (DSCR).


Debt equity ratio = total debt / total equity debt equity ratio = 1233837 / 2178990 * 100 Debt equity ratio = 56.64%


debt-equity ratio=total debt/total equity


debt ratio+Equity ratio=1 debt ratio=1-1/2.47=0.6=60%


There is no such thing as "debt ratio." A ratio is a fraction,, it needs two numbers, one divided by the other. A debt/equity ratio of 0.5 is debt = $500, equity = $1000, or any other set of numbers that equals 0.5 or 50%.


The ideal debt service ration is 1:.5 this optimized the earnings of the company with it's debt load, providing a secure financial future while also allowing for investment into the company.


The total debt ratio is .5; total debt would be .5 as well as total equity (both added together equal 1). Total debt ratio = .5 (total debt)/.5 (total equity)= 1.


For a company, the debt ratio indicates the relationship between capital supplied by outsiders and capital supplied by shareholders. Often the debt ratio is computed as total debt (both current and long-term) divided by total assets. Thus if a company has $50,000 in debt and assets of $100,000, its debt ratio is 50%. The debt ratio is also calculated as total debt/shareholders' equity, long-term debt/shareholders' equity, and in other ways. However computed, the debt ratio provides insight into the firm's capital structure and will vary across industries. A low debt ratio isn't necessarily best: If a company can earn a greater return on debt than its cost, the firm should borrow more and raise its debt ratio -- provided the debt burden won't be crushing when business slows. Turning to consumers, the debt ratio is often shorthand for the "debt to income" ratio, i.e., an individual's monthly minimum debt payments divided by monthly gross income. The debt ratio is monitored by credit card companies and determines the consumer's ability to obtain additional credit


Add up all of the short term debt and long term debt to find your total amount of debt. Add up all of your equity. Divide the total debt by the total equity. The number you get is the gearing ratio.


Formula to calculate the ratio


Stock repurchases increases the debt equity ratio towards higher debt.


Debt service is the total of the loan payments (principal + interest). This is needed for a cash flow projection, whereas you only need the interest portion for a financial statement forecast/budget.



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