If your company is overwhelmed by debts the first step is to search for free advice online, at the debt info centre. Solving the debts your company has in an economy characterised by instability, can sometimes be tricky; that is why it is recommended to ask for professional guidance.

The Debt Service Coverage Ratio (DSCR)
By calculating this ratio, one can determine the company’s capacity to pay its current debts. One can define the debt service coverage ratio as the company’s cash flow split by the debt service.
DSCR = Cash-flow used for paying the debt service/debt service

A DSCR value bigger than 1.0 signifies that the cash-flows generated are enough for the company to pay its debts, while a DSCR smaller than 1.0 signifies worries because the company’s cash-flow is negative.

The Calculation of the DSCR and Term Definitions
DSCR = EBIT/ (interest + (principal/ 1 – tax rate)
The term EBIT stands for earnings before interest and tax and is also known as the operating income. It refers to a company’s profit resulting from its ordinary operations without any interest and tax.
Some economists use EBITDA instead of EBIT due to the fact that EBITDA is a better approximation of the company’s cash-flows.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. It values the company’s performance in financial terms by earnings from its core operations without the inclusion of capital structure, tax and depreciation.

EBITDA = the revenues – the costs (without interest expenses, taxes, depreciation and amortization)
Knowing what these terms refer to can help you become a better manager for your company. Furthermore, being able to find out the value of DSCR and EBITDA will help you contract borrowing services which can be less expensive for your company. It is better on the long term to have proper financial knowledge to manage your debts or to be able to find a debt info centre that understands your needs.