Debt Coverage Ratio (DCR)

Investor Term: 

DCR/DSCR

Definition:

Debt coverage ratio (DCR) is a financial ratio that measures the ability of a borrower to repay their debt obligations. It is calculated by dividing the borrower's net operating income (NOI) by their annual debt service. 

Formula: 

DCR = NOI / Annual Debt Service

Example: 

For example, if a borrower has an NOI of $100,000 and annual debt service of $50,000, then their DCR would be 2.