Exams › IBPS PO › General Awareness

An increase in the Debt Service Coverage Ratio (DSCR) indicates:

1. Entity has lower profitability
2. Entity has higher profitability
3. Entity is able to cover its debt repayment
4. Entity is experiencing higher operational costs

Correct answer: Entity is able to cover its debt repayment

Solution

DSCR = Net Operating Income / Debt Service (principal + interest). An increase in DSCR means the entity generates more income relative to its debt obligations — i.e., it is better able to cover its debt repayment. A DSCR≥1 indicates sufficient income to service debt.

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