Financial ratios are particularly important for small business owners who seek out financing to grow their business. These ratios help business owners measure the profitability and overall health of a business. The term Debt-Service Coverage Ratio (DSCR), also known as Debt Coverage Ratio (DCR), is used in various financial contexts.
In the small business context, DSCR indicates the cash ratio a business has on hand for servicing its pre-existing debt. Specifically, the debt includes payments on leases, principal, and interest.