Debt to EBITDA
Short answer
Debt-to-EBITDA tells you how many years of operating cash earnings it would take to fully repay all debt. Below 3× is conventionally considered the 'healthy borrower' band that most banks underwrite to; above 5× is conventionally considered highly leveraged.
Formula
Debt to EBITDA = Total Debt / EBITDA
Add up all interest-bearing debt (short-term + long-term). Divide by EBITDA.
Why it matters
This is how acquirers, leveraged-buyout investors, and senior lenders measure how levered a business is. Most credit committees won't approve a deal above 4.0×. Above 5.0× is considered junk-rated leverage.
Benchmarks
People also ask
Common questions about Debt to EBITDA
What is Debt to EBITDA?+
Debt to EBITDA shows how many years of earnings it would take to pay off your total debt.
How is Debt to EBITDA calculated?+
Add up all interest-bearing debt (short-term + long-term). Divide by EBITDA.
What is a good Debt to EBITDA?+
A healthy debt to ebitda is typically around < 2.0× — conservative. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Debt to EBITDA matter?+
This is how acquirers, leveraged-buyout investors, and senior lenders measure how levered a business is. Most credit committees won't approve a deal above 4.0×.
See your business's debt to ebitda.
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