Definition
Debt-service coverage ratio is the measure of a company's ability to pay its debt obligations from operating income. Founders reach for it when a vague conversation needs a shared, specific meaning. Name it clearly, then let the next decision — a hire, a price, a test, or a pass — follow from that meaning.
In the room
How the word shows up in a real conversation.
In a Monday review, someone writes Debt-service coverage ratio on the board and restates it: “Measure of a company's ability to pay its debt obligations from operating income.” The next move is a test, a cut, or a double-down — not another debate about the word.
Common mistake
Using Debt-service coverage ratio as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
Debt
Money borrowed by a company or individual that must be repaid with interest.
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Debt financing
Raising capital by borrowing money that must be repaid over time.
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Debt service
Regular payments required to cover interest and principal on outstanding debt.
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Debt-equity ratio
Financial ratio comparing a company's total debt to its shareholders' equity.
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