Finance
The debt coverage ratio (DCR) used by commercial lenders measures:
AThe ratio of personal debt to income
BThe ratio of net operating income to annual debt service✓ Correct
CThe ratio of loan amount to property value
DThe ratio of operating expenses to gross income
Explanation
The debt coverage ratio (DCR or DSCR) = NOI ÷ Annual Debt Service. Lenders use it to ensure property income sufficiently covers mortgage payments. Most commercial lenders require a DCR of 1.20 or higher.
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