DSCR tells you if a company (or project) generates enough cash to cover its debt obligations. Formula: EBITDA ÷ (Interest + Principal Repayments). A DSCR of 1.5x means the company earns $1.50 for every $1.00 of debt service. Lenders require minimums: investment-grade corporates often need 2x+, real estate projects 1.25x+, leveraged buyouts accept 1.1x-1.3x. Think of it as a paycheck-to-rent ratio for companies: just as landlords want rent ≤ 30% of income, lenders want debt service well below EBITDA. DSCR < 1.0 means the company can't cover debt from operations — it must refinance, sell assets, or default. Unlike interest coverage (which ignores principal), DSCR includes the full debt burden, making it a more conservative credit metric.