Valuation of business 2020-2021 Debt Yield

  • This topic has 1 reply, 2 voices, and was last updated 10 months ago by Jose Duplito.
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  • #36286
    Jose Duplito
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    Due to the current low interest environment, is debt yield a better metric for banks to assess risk instead of DSCR?

    #38832

    Good question, @imaajd. Yes and no. There are times when one may be better than the other, depending on the terms and factors built into DSCR. Debt yield is better to use for consistency and comparison because DSCR can be manipulated by inclusion of low rates and amortization. Each, however, is a data point for consideration and reflect different elements of risk. If you absolutely have to have one, very accurate number, debt yield would likely be better. However, including both in the set of data for risk evaluation would be recommended.

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