Debt Coverage Ratio

Term Main definition
Debt Coverage Ratio

A measurement of a company's ability to pay debt. The ratio of a borrowing company's income, EBITDA or a similar measure to the borrowing company's expense for debt service during the same period (i.e., the amount of principal and interest paid to keep the loan current). A ratio that is high, like 10:1, indicates an excellent ability to repay the debt.  Also called the Debt Service Ratio or the Debt Service Coverage Ratio.