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The payments needed to meet interest and repayment obligations on debt.
Interest compensates the lender under the agreement, while principal repayments reduce the underlying amount owed. Some loans spread principal payments over time; others require a large final payment. Businesses and governments compare debt service with available cash or revenues. A coverage measure is informative only when its cash-flow definition and the obligations included are clearly stated.
Suppose a business must pay J$2 million of interest and J$8 million of principal this year. Its debt service is J$10 million. If the relevant cash available for those payments is J$15 million, a simplified debt-service coverage ratio is 15 divided by 10, or 1.5 times. That leaves a J$5 million arithmetic buffer before any costs omitted from the cash definition.
FosRich seeks time from bondholders as restructuring talks continue