1. Analysis of Debt Servicing Capability: a Key to Financial Stability
The debt servicing capability (DSC) is a central instrument for the evaluation of companies and business partners. It helps to determine whether existing financial obligations can be met. Especially in the context of providing credit, this key figure plays a decisive role because it offers both lenders and borrowers security regarding the long-term capability to repay the debt. A precise analysis of the debt servicing capability helps to minimize risks and optimize financial planning.
2. What Does Debt Servicing Capability Mean?
The debt servicing capability describes the unrestricted ability of a debtor to make all the interest and amortization payments using current income or surpluses on a sustainable basis, now and in the future. This characteristic is an essential indicator of the financial stability and creditworthiness of companies.
In a corporate context, operating cash flow: current income minus operating costs, is often used for this calculation. The aim is to ensure that there is sufficient financial leeway for the repayment of loans.
The consideration of future cash flows was integrated as part of the fifth revision of MaRisk and the EBA Guidelines 2020/06 on lending and credit monitoring. As part of the regulatory requirements for granting loans, the analysis includes sustainable and expected cash flows. The guidelines explicitly require an analysis of future cash flows and binding scenario analyses for medium-sized and large companies.
3. Calculation of the Debt Servicing Capability with the Balance Sheet Analysis Software FINOYO
In order to meet these requirements, SCHUMANN has directly integrated the evaluation of the debt servicing capability into its balance sheet analysis software FINOYO.
Through the automated assessment of the utilization of the capital service limit and automated scenario analyses, our tool enables meaningful and efficient DSC analysis. We thus offer companies and their business partners a precise and optimized solution that is designed to meet the regulatory requirements.
The DSC analysis in FINOYO offers a wide range of advantages for the evaluation of debt servicing capability. It enables an automated and flexible calculation of debt servicing, which can be tailored to meet specific requirements. With detailed analyses of over or under-capacity it enables an immediate estimate of the DSC of the company. The precise calculation and evaluation of the utilization rate provides deeper insights into the financial capability of the company. Advanced scenario and sensitivity analyses tailored to market events provide targeted support. They help to reduce uncertainties and enable well-founded decisions.