What would indicate that a company has sufficient operating income for debt service?

A high Debt Service Coverage Ratio (DSCR) indicates that a company has sufficient operating income for debt service. The DSCR is a financial metric that compares a company's operating income to its debt obligations. A ratio greater than 1 suggests that the company generates enough income to cover its debt payments, meaning it can comfortably meet its financial commitments. This is crucial for creditors and investors as it reflects the company's financial health and ability to manage its debts effectively.

In contrast, low operating expenses, a high debt to income ratio, and low asset turnover do not directly reflect a balanced and healthy income relative to debt obligations. Low operating expenses might indicate efficiency but does not necessarily show income sufficiency for debt service. A high debt to income ratio could signal potential risk, as it suggests that a large portion of income is earmarked for debt repayment, which could strain cash flow. Low asset turnover reflects inefficient use of assets to generate revenue, which may negatively influence a company's ability to generate the income necessary for servicing its debt.