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Net Debt to EBITDA Calculator

Enter total debt, cash and EBITDA to get the net debt to EBITDA ratio.

How it is calculated

The tool first computes net debt, then divides it by EBITDA: net debt = total debt − cash and ratio = net debt / EBITDA. All three amounts must be in the same currency and EBITDA should be for the same period, usually the last twelve months. Cash is optional: if left empty it is treated as 0, so the result is gross debt over EBITDA. Debt and cash cannot be negative, and EBITDA must be above zero, otherwise nothing is shown. If cash exceeds debt the net debt and the ratio turn negative, meaning a net cash position. The ratio is shown with two decimals as a multiple (x).

Worked example

A company has total debt of 500000, cash of 120000 and EBITDA of 190000. Step 1: net debt = 500000 − 120000 = 380000. Step 2: 380000 / 190000 = 2. The tool reports a net debt of $380,000.00 and a ratio of 2.00, so net debt equals two years of current EBITDA.

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Common mistakes

  • Using net income or operating profit instead of EBITDA; the ratio is defined on EBITDA and gives a different value otherwise.
  • Using a single quarter's EBITDA against full-year debt, which makes leverage look about four times worse.
  • Leaving out cash and equivalents and then comparing the gross-debt result to a net-debt covenant.
  • Entering a negative EBITDA to see the ratio; the tool shows nothing for it, since a multiple is not meaningful for a loss-making year.
  • Entering debt as a negative number; debt is entered as a positive amount.

Sources

About this calculator

Net debt to EBITDA is (total debt − cash and equivalents) ÷ EBITDA — it estimates how many years of current earnings, before interest, tax, depreciation and amortization, it would take a company to pay off its debt if every dollar of EBITDA went straight to debt repayment.

Lenders write covenants directly against this ratio (commonly capping it at 3-4x for investment-grade credits) because it's the standard shorthand for how stretched a company's balance sheet is — private equity deals, leveraged buyouts and credit ratings all lean on net debt/EBITDA as the headline leverage number, since it normalizes debt against the cash-generating power that actually services it.

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Comments (1)

  • Editorial team

    Lenders usually define EBITDA and cash netting in their own agreement, with adjustments for one-off items, so a covenant test may not match a figure built from the accounts. With debt of 1,500,000, cash of 500,000 and EBITDA of 750,000, net debt is 1,000,000 and the ratio 1.33. Check which cash balances count in your case. Which adjustments does your lender add to EBITDA?

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