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Metric · Leverage

Net Debt / EBITDA Explained

Q: Why use net debt instead of gross debt?

Because cash and equivalents could theoretically be used immediately to repay debt. Net debt shows the actual economic burden.

The ratio of net debt to EBITDA shows how many years a company would need to repay its debt purely from operating earnings (EBITDA), one of the central metrics for assessing leverage.

Updated 20266 min read

Formula

Net debt / EBITDA = (Debt − cash and equivalents) ÷ EBITDA

< 2.0Solid leverage

2.0–4.0Elevated leverage

> 4.0Critical leverage

Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator

Net debt

Interest-bearing debt minus cash and equivalents.

Denominator

EBITDA

Operating profit before interest, taxes, depreciation and amortization.

Net debt/EBITDA calculator

Enter your own figures and see the value instantly.

Net debt (€m)

EBITDA (€m)

Result net debt/EBITDA

Elevated leverage

2.0

Values between 0 and 2.0 are usually considered solid. The company could pay down its debt quickly from its own strength.

Values above 4.0 are considered critically high and increase risk when rates rise or profits fall.

Capital-intensive industries (e.g. utilities, telecom) structurally tolerate higher values than margin-rich software companies. Always assess by industry.

A negative value with positive EBITDA means the company holds more cash than interest-bearing debt (a net cash position). Many large technology companies sit below zero for that reason.

Typical industry ranges

Typical value range per sector, for orientation.

Real Estate

5.1–9.6

Utilities

2.9–6.3

Communication Services

-0.1–2.8

Consumer Defensive

0.6–2.6

Industrials

0.0–2.7

Healthcare

-0.3–2.3

Consumer Cyclical

-0.1–2.7

Basic Materials

-0.2–2.3

Energy

0.5–3.2

Financial Services

-3.7–3.4

Technology

-0.9–1.0

Aggregated sector values (median band). Data as of Nov 15, 2026

Threshold slider

How many sectors meet a threshold?

Move the threshold and see how many of the sectors shown above sit below or above it with their median.

Bounded preview

Threshold for Net debt/EBITDA1.2

Comparison

6 of 11 sectors meet the thresholdBased on the aggregated sector medians above, not on individual companies.

What the metric looks like at large companies

Data as of Nov 15, 2026

Name	Sector	Value	Sector median
Apple Inc.	Technology	0.1	0.0
Alphabet Inc Class A	Communication Services	-0.7	2.0
Amazon.com Inc	Consumer Cyclical	0.9	1.1
Space Exploration Technologies Corp. Class A Common Stock	Industrials	-0.5	1.4
Saudi Aramco	Energy	0.2	0.9
Eli Lilly and Company	Healthcare	1.1	1.2

Selection: the company with the highest market cap in each sector. Not a recommendation, only worked examples with real values.

Used in these strategies

Piotroski F-Score (9-Point Check)Nine hard balance-sheet criteria separate substance from a downward spiral.Altman Z-Score: Stress TestFive balance-sheet ratios are condensed into a single measure of bankruptcy risk.

Frequently asked questions

At what value is debt considered critical?

As a rough guideline, a ratio above 4.0 is considered critically high. The exact threshold depends heavily on industry and interest rate levels.

Why use net debt instead of gross debt?

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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.