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A DSCR less than 1 indicates:

AInability to fully service the current debt obligations
BAdequate margin of safety
CExcellent debt servicing capacity
DNo debt outstanding
Answer & Solution
Correct answer: A. Inability to fully service the current debt obligations
1. DSCR < 1 means Earnings available for debt service < (Interest + Instalments). 2. The firm cannot service its debt from current earnings without additional financing. 3. Lenders treat this as a credit warning. _Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.2.2(a)_
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