DEBT SERVICE RATIO Definition

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DEBT SERVICE RATIO is the measurement of debt payments to gross income.

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PURCHASE METHOD is accounting for an acquisition using market value for the consolidation of the two entities` net assets on the balance sheet. Generally, depreciation/amortization will increase for this method (due to the creation of goodwill) compared to the POOLING OF INTEREST METHOD resulting in lower net income.

NON-DISCRETIONARY ACCRUAL is a mandatory expense/asset that is recorded within the accounting system that has yet to be realized. An example of this would be payroll taxes.

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