Which ratio measures projected annual cash flow divided by required annual debt payments?

The Debt Service Coverage Ratio (DSCR) is the correct choice as it specifically measures the ability of an entity to cover its debt payments with its cash flow. By calculating the projected annual cash flow and dividing it by the required annual debt payments, the DSCR provides insight into whether an organization generates sufficient cash flow to meet its debt obligations.

A DSCR of greater than one indicates that cash flow exceeds debt payments, demonstrating financial stability and solvency, which is particularly important for lenders and investors assessing risk. In contrast, a ratio of less than one signifies that the entity may struggle to cover its debt, raising concerns about its financial health.

The other options do not evaluate the relationship between cash flow and debt payments. The Current Ratio assesses short-term liquidity by comparing current assets to current liabilities, the Return on Investment Ratio measures the efficiency of an investment, and the Operating Margin Ratio evaluates the proportion of revenue remaining after covering operating expenses, none of which directly relate to debt servicing capability.