DSCR = Operating Income / Total Interest Payments
To calculate the DSCR ratio, divide Operating Income by Interest Payments. The result should be greater than 1.0 for a company to be considered healthy.
A high DSCR ratio means that the company is generating more Operating Income than it needs to pay its interest payments. This gives the company room to grow and expand operations. A low DSCR ratio means that the company is not generating enough Operating Income to cover its interest payments. This could lead to financial troubles down the road.
It is important to monitor the DSCR ratio over time and compare it to other ratios, such as the Debt-to-Asset Ratio and the Interest Coverage Ratio.