Net debt / EBITDA
How many years a company would need to clear its net debt using its entire EBITDA.
Formula
\frac{\text{Net debt}}{EBITDA}Net debt at the reporting date over trailing twelve-month EBITDA.
How to read the number
The headline measure of debt sustainability and, almost always, a covenant in the loan agreement. Breaching the threshold can bar the company from paying dividends.
When the metric lies
With negative or near-zero EBITDA the ratio loses meaning: dividing by almost nothing produces an absurdly large number. It does not apply to banks at all.
Where it is used
The metric is calculated across every security in the catalogue and appears on the instrument card, in the multiples table and in the screener.
Also known as: net debt to ebitda, leverage ratio