Keyword Analysis & Research: coverage ratio

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Frequently Asked Questions

What is a good coverage ratio?

Overall, an interest coverage ratio of at least two is the minimum acceptable amount. In most cases, investors and analysts will look for interest coverage ratios of at least three, which indicate that the business’s revenues are reliable and consistent.

What is a good debt service coverage ratio?

In general, a good debt service coverage ratio is 1.25. Anything higher is an optimal DSCR. Lenders want to see that you can easily pay your debts while still generating enough income to cover any cash flow fluctuations. However, each lender has their own required debt service coverage ratio.

What is meant by fixed charges coverage ratio?

The fixed-charge coverage ratio (FCCR) measures a firm's ability to cover its fixed charges, such as debt payments, interest expense, and equipment lease expense. It shows how well a company's earnings can cover its fixed expenses. Banks will often look at this ratio when evaluating whether to lend money to a business.

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