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Business Definition for: debt coverage ratio
debt coverage ratio
mathematical relationship of Net Operating Income (NOI) divided by annual debt service ; often used as underwriting criterion for income property mortgage loans.
See also debt service coveragedebt coverage ratio
the relationship between Net Operating Income (NOI) and annualdebt service (ADS) . Often used as an underwriting criterion for income property mortgage loans.
Example: Annual debt service for a mortgage loan on a certain office building is $10,000. The property generates $25,000 in annual gross rent, and requires $7,000 for expenses of operation, leaving $18,000 net operating income. The debt coverage ratio is 1.80, calculated by the following formula:
| NOI ADS |
= | $18,000 $10,000 |
= | 1.8 |
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
