A guidebook on public-private partnership in infrastructure

Financial indicators 
A number of financial indicators are used to assess the financial viability of a 
project as well as alternative financial structure for its implementation. Some of the 
commonly used indicators are: 
• Return on Equity (ROE) 
• Annual Debt Service Coverage Ratio (ADSCR) 

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A Guidebook on Public-Private Partnership in Infrastructure 
45 
 

• Project Life Coverage Ratio (PLCR) 

• Payback 
period 
• Net Present Value (NPV) 
• Financial Internal Rate of Return (FIRR) 
Return on Equity: 
It is the net income earned on an equity investment. It measures 
the investment return on the capital invested by shareholders and should not be less 
than the expected return on equity. 
Annual Debt Service Coverage Ratio: 
It is a measure that calculates the cash flow 
for a period in relation to the amount of loan interest and principal payable for that 
same period. The ratio should be (at the minimum) equal to or greater than 1 as the 
same demonstrates that the project is earning enough income to meet its debt 
obligations. It is an important criterion used by financiers to monitor financial 
performance of a project. 
Project Life Coverage Ratio: 
It is also similar to debt service coverage ratio but 
considers debt service coverage on a given date based on future cash flows from 
that date until the end of the project life. This ratio enables lenders to assess whether 
or not there would be sufficient cash flow to be able to service the debt in case the 
debt needs to be restructured.
Payback period:
It is the length of time needed to recover initial investment on a 
project. It may be determined using either discounted cash flow or non-discounted 
cash flow.