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Can Debt Service Coverage Ratio Be Negative? Understanding the Risks and Implications
Understanding the debt service coverage ratio (DSCR) is crucial for anyone navigating the financial landscape, especially businesses and investors. This key metric measures a company's ability to cover its debt obligations with its operating income. But what happens when this ratio dips into negative territory?
A negative DSCR raises red flags and signals potential financial distress. It indicates that a company isn’t generating enough income to meet its debt obligations, which can lead to severe consequences. Exploring the implications of a negative DSCR can provide valuable insights into a company's financial health and risk profile, making it essential for stakeholders to grasp its significance.
