Which ratio is used to evaluate income-producing properties by relating net operating income to total debt service?

The Debt Service Coverage Ratio (DSCR) is the correct answer because it specifically measures a property’s ability to generate enough income to cover its debt obligations. The DSCR is calculated by taking the net operating income (NOI) and dividing it by the total debt service, which includes all principal and interest payments on loans.

This ratio is crucial for lenders and investors as it provides insight into a property’s financial health. A DSCR greater than 1 indicates that the property generates sufficient income to cover its debt payments, while a ratio of less than 1 suggests that the income is not enough to meet those obligations, signaling a potential risk in the investment.

In contrast, the other choices serve different functions. The capitalization rate focuses on the relationship between a property's NOI and its current market value, providing insights regarding the expected return on an investment relative to its price. Return on investment measures the gain or loss generated relative to the cost of the investment, while the loan-to-value ratio assesses the amount of loan given compared to the property’s appraised value, focusing primarily on financing risk rather than income generation.