Calculating debt servicing involves determining the total amount of debt payments due over a specific period. This includes both the interest and the principal repayments. The formula for calculating the debt service coverage ratio (DSCR) is:
DSCR = Net Operating Income / Total Debt Service
A DSCR greater than 1 indicates that the business generates sufficient income to cover its debt obligations, while a DSCR less than 1 suggests potential difficulties in meeting debt payments.