If you have loans, you need to track these key metrics: Debt service coverage ratio and debt to equity ratio.
These ratios sound complicated and scary, but in this post we’ll break them down and explain them in common sense language.
Debt service coverage ratio (DSCR)
- This ratio compares brewery cash flow in to cash flow out.
- “Cash flow in” is often measured using EBITDA, which is earnings before interest, taxes, depreciation and amortization.
- “Cash flow out” is measured using the amount of debt payments you make to the bank.
Debt to equity
- This ratio compares total debt (loans) to the total net equity of the brewery.
- This information is found on your balance sheet in the “liabilities” section and the “equity” section.
The first step is to review your loan documents and see what you have for financial requirements on your loan.
The next step is to download this Key Metrics Banking and Financing tracker and watch the explainer video below.
P.S. The Ultimate Guide to Brewery Key Metrics is included with your subscription to Craft Brewery Financial Training.
