Annual Debt Service Coverage Ratio Calculator: Assess Financial Health

How to use the tool

1. Net Operating Income (USD) – Type your yearly NOI, e.g., 150,000 or 610,500.
2. Depreciation (USD) – Add annual depreciation, e.g., 35,000 or 95,200.
3. Non-Cash Expenses (USD) – Enter amortisation, write-downs, etc., e.g., 7,500 or 18,300.
4. Annual Debt Service (USD) – Insert total scheduled principal + interest, e.g., 140,000 or 420,000.
5. Press “Calculate ADSCR” to display the ratio and interpretation.

Formula

$$ADSCR = rac{Net\ Operating\ Income + Depreciation + Non\text{-}Cash\ Expenses}{Annual\ Debt\ Service}$$

Example 1

• NOI = $150,000
• Depreciation = $35,000
• Non-Cash = $7,500
• Debt Service = $140,000

$$ADSCR = rac{150,000+35,000+7,500}{140,000}=rac{192,500}{140,000}=1.38$$

Example 2

• NOI = $600,000
• Depreciation = $120,000
• Non-Cash = $20,000
• Debt Service = $400,000

$$ADSCR = rac{600,000+120,000+20,000}{400,000}=rac{740,000}{400,000}=1.85$$

Quick-Facts

• Lenders target ≥ 1.25 × ADSCR for project finance (World Bank PPP Guide, 2022).
• Depreciation typically ranges 2–10 % of asset cost (IRS Pub 946, 2023).
• Loan covenants may require quarterly ADSCR testing (Bank of America Covenants Guide, 2022).
• ADSCR adds back non-cash charges, mirroring EBITDA (Investopedia “DSCR” page).

FAQs

What is ADSCR?

ADSCR is the ratio of adjusted operating cash flow to scheduled annual debt service; it gauges your ability to pay principal and interest without raising new funds (Fitch Infrastructure Criteria, 2022).

Why is 1.0 the breakeven point?

A ratio of 1.0 means cash inflow equals outflow for debt; any shortfall forces you to dip into reserves or refinance (S&P Global Banking Handbook, 2023).

What happens when ADSCR falls below 1?

Falling under 1 triggers covenant breaches, higher borrowing costs, or loan acceleration clauses in many credit agreements (Loan Syndications & Trading Association, 2022).

How can you improve ADSCR?

Raise NOI by increasing prices, cutting operating costs, or refinancing to lower interest—each boosts numerator or cuts denominator (Deloitte Cash-Flow Management Report, 2023).

How often should you recalculate?

Quarterly reviews align with most lender testing schedules and capture seasonal earnings swings (Bank of America Covenants Guide, 2022).

Is ADSCR different from DSCR?

Both measure debt coverage, but ADSCR uses annual figures while DSCR can be monthly, quarterly, or annual; formulas are identical (Investopedia “DSCR” page).

Does depreciation always raise ADSCR?

Yes. Depreciation is a non-cash charge added back to cash flow, so higher depreciation increases the numerator and lifts the ratio without affecting liquidity (IRS Pub 946, 2023).

Which sectors track ADSCR closely?

Infrastructure, real estate, and energy projects rely on ADSCR in financing agreements because cash flows are contracted and highly leveraged (Moody’s Project Finance Methodology, 2023).