Debt Service Ratio

From Financial Literacy Wiki

Debt Service Ratio is the ratio of your total annual cash loan payments to your annual income. The numerator in this ratio excludes current liabilities other than loan obligations. It measures your ability to service your loans payment in a prompt and timely fashion. The smaller the ratio, the better is your ability. A ratio larger than 0.4 indicates that you are too highly leveraged and may encounter difficulties in servicing your loan obligations.