Knowledge base
Glossary · Updated Oct 23, 2026
Net debt to EBITDA
How many years of operating earnings it would take to repay a company’s net debt. A standard leverage check.
Net debt to EBITDA compares what a company owes, after netting off the cash it holds, with the earnings it generates before interest, tax, depreciation and amortisation.
Formula
Net debt to EBITDA = net debt ÷ EBITDA
Net debt is total debt less cash and cash equivalents. The platform also computes the gross version, total debt ÷ EBITDA, which ignores the cash balance.
Worked example
Measure | Value (millions) |
|---|---|
Total debt | 2,500 |
Cash and cash equivalents | 500 |
Net debt | 2,000 |
EBITDA | 1,000 |
Net debt to EBITDA | 2.0x |
Total debt to EBITDA | 2.5x |
How to read it
- Lower is generally more comfortable, but what counts as high depends on the sector. Capital-heavy businesses usually carry more debt than asset-light ones.
- A rising ratio often means debt is growing faster than earnings. Check whether the cause is an acquisition, a fall in EBITDA, or a one-off.
- EBITDA is a measure, not cash. Pair this ratio with interest coverage and free cash flow.