What is Net Debt to EBITDA Ratio ?

Definition of Net Debt to EBITDA Ratio

Net Debt to EBITDA Ratio

The net debt to EBITDA ratio  earnings earlier than interest depreciation and amortization (EBITDA) ratio is an amount of leverage, considered as a company’s interest-bearing liabilities minus money or cash equivalents, divided by its EBITDA.

Net Debt to EBITDA Ratio

The net debt to EBITDA ratio is a debt ratio that shows how countless years it would take for a business to pay back its debt if net debt and EBITDA are held constant. If an organization has more cash than debts, the ratio can be negative. The net debts to EBITDA ratio are popular with experts because it considers an organization’s ability to reduce its debts. Percentages higher than 4 or 5 typically set off alert alarms because this indicates that an organization is less likely to be able to handle its debts pressure, and thus is less likely to be able to take on the additional debts required to grow the business. The net debts to EBITDA ratio should be compared to that of a standard or the industry average to find out the credit reliability of an organization. Additionally, the horizontal research could be performed to find out whether an organization has grown or reduced its debts pressure over a specified period.

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