Formula To Calculate DSCR :

The debt service coverage ratio (DSCR), also known as "debt coverage ratio" (DCR), is the ratio of operating income available to debt servicing for interest, principal and lease payments.

To calculate the Times Interest Earned Ratio(financial), use the following formula

DSCR = Net Operating Income / Debt Service

Net Operating Income = Net Income + Depreciation + Interest Expense + Other Non-cash Items

Debt Service = Principal Repayment + Interest Payments + Lease Payments

Where

EBIT - Earnings before Interest and Taxes

Example :

Company XYZ net income of $5,500, depreciation of $6,000, interest expense of $6,000, non-cash items of $4,250, principal repayment of $1500, interest payments of $2,250, and lease payments of $1750.

Net Operating Income = $5,500 + $6,000 + $6,000 + $4,250 = $21,750

Debt Service = $1500 + $2,250 + $1750 = $5,500

DSCR = $21,750 / $5,500 = 3.955

Therefore, this company XYZ has DSCR of 4