What quantitative term is often used to assess a borrower’s capability to repay a loan?

The debt service coverage ratio (DSCR) is a key metric used to evaluate a borrower's ability to repay a loan by measuring the cash flow available to pay current debt obligations. It is calculated by dividing the net operating income by the total debt service. A DSCR greater than 1 indicates that the borrower generates enough income to cover their debt payments, which shows financial health and reduces lenders' risk. This ratio is particularly critical in commercial lending but also applies in personal loans to provide insight into a borrower’s financial stability.

The other options, while relevant in financial analysis, do not specifically assess repayment capability in the same direct manner. The loan-to-value (LTV) ratio focuses on the amount of the loan compared to the appraised value of the property, providing insight into the risk for the lender but not directly addressing the borrower’s cash flow or ability to make payments. The percentage of ownership reflects the equity stake in an asset and does not provide direct information about income or debt servicing. Market value analysis primarily evaluates property values and can contribute to understanding investment potential but does not assess a borrower's income relative to their debt obligations.