DEStart for free
Metric · Leverage

Net Debt / EBITDA Explained

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.

Sign up freeOpen in screener
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.

Calculator

Enter your own figures and see the value instantly.

Result net debt/EBITDA
Elevated leverage
2.0
1
Values between 0 and 2.0 are usually considered solid. The company could pay down its debt quickly from its own strength.
2
Values above 4.0 are considered critically high and increase risk when rates rise or profits fall.
3
Capital-intensive industries (e.g. utilities, telecom) structurally tolerate higher values than margin-rich software companies. Always assess by industry.

Used in these strategies

Piotroski F-Score (9-Point Check)Nine hard balance-sheet criteria: separating substance from downward spirals.Altman Z-Score: Stress TestThe bankruptcy early-warning system: five balance-sheet ratios, one risk score.

Frequently asked questions

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

Screen all stocks by this metric

Filter the entire market by this and dozens of other metrics, in a free account.

Sign up free →No credit card required

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

More metrics

What Is a Good P/E Ratio?How to Calculate Dividend YieldReturn on Equity (ROE) ExplainedFree Cash Flow (FCF) ExplainedEV/EBIT ExplainedReturn on Assets (ROA) ExplainedEBIT Margin ExplainedGross Margin ExplainedPrice-to-Book Ratio (P/B) ExplainedPEG Ratio ExplainedEarnings Per Share (EPS) ExplainedEquity Ratio ExplainedReturn on Sales (Net Margin) ExplainedEBITDA Margin ExplainedCurrent Ratio ExplainedDebt-to-Equity Ratio ExplainedEV/EBITDA ExplainedDividend Payout Ratio ExplainedHow to Calculate Revenue Growth