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    Question

    If a company reports a DSCR of 2.5, which of the

    following reflects the correct interpretation?
    A Net worth is 2.5 × debt Correct Answer Incorrect Answer
    B Assets are financed 2.5 × by loans Correct Answer Incorrect Answer
    C Company generates 2.5 × operating income for debt Correct Answer Incorrect Answer
    D Needs 2.5 × more debt Correct Answer Incorrect Answer
    E Margin of safety is 2.5% Correct Answer Incorrect Answer

    Solution

    DSCR of 2.5 means the operating income is 2.5 times the debt service obligation.

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