Overview

Net Debt/EBITDA ratio is a financial ratio which measures the levearge of a company and its ability to meet debt obligations. It is a common ratio used by credit rating agencies to assess how likely a company will default on its debt. The formula for calculating the Net Debt/EBITDA ratio is as follows:

Net Debt/EBITDA = (Short-term Debt + Long-term Debt - Cash and Cash Equivalents) / EBITDA

A low Net Debt/EBITDA ratio is usually preferred by credit analysts because it tells that the company is not highly leveraged and has the ability to repay debt obligations. A company with a high Net Debt/EBITDA ratio is highly leveraged and is likely to have a lower credit rating. This would lead to a higher yield on bond to compensate for the higher default risk.

Share
Reviews Add a review
No reviews yet

More From Corporate Finance Institute®

Browse our top rated business templates. See All
Energy Industry Comps Template Energy Industry Comps Template
297
19
This energy industry comps template provides a guideline and example of what a comparables universe would look like for a…
Financial Institution Dividend Discount Model
878
20
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
553
0
The loan payment calculator allows users to determine the principal and interest payment each month until the full balance of…
DDM - Excel Dividend Discount Model Template
690
56
The dividend discount model template allows investors to value a company base on future dividend payments. This is based on…
Non-directional trading strategy template Non-directional Trading Strategies Template
605
0
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
restructuring financial model template preview 1 Restructuring Financial Model Template
874
0
This restructuring financial model template is used to demonstrate the financial interactions behind the restructuring process. Adjust this model to…