Home › CA Inter › Financial Management › Coverage Ratios › A normally satisfactory Debt Service Coverage Ra…
A normally satisfactory Debt Service Coverage Ratio (DSCR) is:
ALess than 1
B1
C1.5 to 2
DMore than 5
Answer & Solution
Correct answer: C. 1.5 to 2
1. DSCR = Earnings available for debt services / (Interest + Instalments).
2. A DSCR of 1.5 to 2 is considered satisfactory per the study material.
3. A value below 1 indicates inability to service current debt obligations.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.2.2(a)_