DSCR stands for:

Debt Service Coverage Ratio

The correct answer is option 2- Debt Service Coverage Ratio.

DSCR stands for Debt Service Coverage Ratio.

Debt Service Coverage Ratio takes care of the deficiencies of the Interest Coverage Ratio (ICR). The cash profits generated by the operations are compared with the total cash required for the service of the debt and the preference share capital. It is calculated as follows:

(Profit after tax + Depreciation + Interest + Non Cash exp.) / (Pref. Div + Interest + Repayment obligation)

A higher DSCR indicates better ability to meet cash commitments and consequently, the company’s potential to increase debt component in its capital structure.