FINOVIEW

Net debt / EBITDA

#10
GUIDING QUESTION

How many years of EBITDA do you need to repay your financial debt?

Widely used by banks and investors.

01.What it is

It relates net financial debt to operating capacity (EBITDA).

02.Component masses

  • Net financial debt
  • EBITDA

03.Formula

MAIN FORMULA
Net debt/EBITDA: Net financial debt ÷ EBITDA

04.Interpretation

  • < 2 → low
  • 2–4 → reasonable
  • > 5 → high risk (depending on the sector)

05.Related to

  • Interest coverage
  • Overall solvency