How to do DSCR calculation.

Question

Accepted Answer

DSCR calculation is a method used to assess a borrower's ability to generate enough cash flow to cover debt obligations.

DSCR stands for Debt Service Coverage Ratio.
It is calculated by dividing the borrower's net operating income by their total debt service.
Net operating income includes the borrower's revenue minus operating expenses.
Total debt service includes all debt payments, such as principal and interest.
A DSCR of 1 or higher indicates that the borrower has enough cash flow to cover their debt obligations.
Lenders typically require a minimum DSCR of 1.2 or higher for loan approval.
For example, if a borrower has a net operating income of $100,000 and total debt service of $80,000, the DSCR would be 1.25.

Accepted Answer

In UAE DSCR calculation is based on average balance( account statement) / total liabilities ( identify by AECB report )
Benchmark = 1 .25- 1.5

In India DSCR is calculated on bases of PAT & interest payment / Debt service ( outside liabilities - payable to lenders )
Bench mark = 1.1 & above

Top Mashreq Global Services Lead Credit Analyst interview questions & answers