Net debt to EBITDA

Net debt to EBITDA shows how many years of operating profit before depreciation it would take to clear net financial debt. It is the most direct way to size borrowing against the ability to generate cash, and the benchmark banks write into loan covenants. Above 3 tends to raise flags, though the tolerable threshold depends heavily on the sector: a regulated utility lives comfortably with levels that would suffocate a cyclical business.

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Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.