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Debt Coverage Ratio Calculator

LAST UPDATE: August 24th, 2018

Calculator

What is the Debt Coverage Ratio?

The debt coverage ratio is the ratio of operating income to debt service.

It is a metric that is used to evaluate how well a company can pay debt.

A debt coverage ratio of ‘1’ means that operating income is just covering debt service.

A debt coverage ratio of more than one means that there is more operating income than debt service costs.

A debt coverage ratio of less than one means that debt service costs exceed operating income.

Formula

Debt Coverage Ratio =  Operating Income / Debt Service

Example

A company has net operating income of $3,000 and debt service of $1,500.

Debt Coverage Ratio = $3,000 / $1,500 = 2

Therefore, this company’s debt coverage ratio is 2.

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