Net debt to EBITDA calculator
Leverage ratio is a leverage and coverage metric, calculated as Net debt ÷ EBITDA (or total debt ÷ EBITDA). Definition is usually specified in the loan agreement, not by convention.
- Formula
- Net debt ÷ EBITDA (or total debt ÷ EBITDA)
Leverage ratio (net debt to EBITDA)
Leverage = (Total debt − Cash) ÷ EBITDA$
$
$
Net debt ÷ EBITDA
2.00×
How it’s worked out
- 1Net debt$3,000,000 − $700,000$2,300,000
- 2Net debt ÷ EBITDA$2,300,000 ÷ $1,150,0002.00×
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
How to read it
Net debt to EBITDA says how many years of EBITDA it would take to repay debt net of cash.
It is the ratio most leveraged-lending covenants are written around.
Common mistakes
- Quoting a multiple of negative EBITDA.
- Using one quarter's EBITDA instead of trailing twelve months.
Questions
- What is a typical leverage limit?
- Many lenders cap senior debt at 3× to 4× EBITDA; above 5× is considered highly leveraged.
- Why net debt?
- Net debt subtracts cash from debt, so a company holding more cash than debt has negative net debt and negative leverage.
Read it with
The metrics read alongside this one, and the terms it is confused with.
- Debt-to-equity calculatorDebt-to-equity is a leverage and coverage metric, calculated as Total debt ÷ Total equity.Calculator
- EBITDA calculatorEBITDA is a profitability metric, calculated as Net income + interest + income taxes + D&A (≈ operating income + D&A with no other non-operating items).Calculator
- Interest coverage calculatorInterest coverage is a leverage and coverage metric, calculated as EBIT ÷ Interest expense.Calculator
- Leverage ratioLeverage ratio is a leverage and coverage metric, calculated as Net debt ÷ EBITDA (or total debt ÷ EBITDA).Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.