Debt service coverage is one way that you can tell whether a hospital will have enough money to…

Debt service coverage is one way that you can tell whether a hospital will have enough money to pay the debt payments that are due within the next year. The formula to calculate debt service coverage is:

[Net Income + Depreciation/Amortization Expense] / Maximum Amount of Debt Payments Owed within the Year

In 2019, Serenity Now Hospital had a debt service coverage ratio of 2.81.

In 2020, Serenity Now’s debt service coverage ratio was 1.28.

How might you explain the change in this ratio? What factors would you look at, and what might cause the ratio to decline? Please be sure to include your reasoning. Your response should be at least three sentences long.