The financial definition for Debt service coverage ratio:
Earnings before interest and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate.
Adequacy of coverage
Adequacy of coverage A test that measures the extent to which the value of an asset is protected from potential loss either through insurance or hedging.
Asset coverage test
Asset coverage test A bond indenture restriction that permits additional borrowing if the ratio of assets to debt does not fall below a specified minimum.
Cash flow coverage ratio
Cash flow coverage ratio The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.