Net debt / EBITDA
Years of EBITDA needed to pay off net debt. Below 3x is generally considered comfortable leverage.
Net debt / EBITDA = Net debt ÷ EBITDA
How many years of gross operating profit it would take to repay the debt. It's the ratio banks look at, and the one usually written into loan covenants, so it isn't merely an indicator: breaching it can trigger real contractual consequences.
As a rough guide, below 2× is comfortable, 2× to 3× normal, above 4× demanding — but the threshold depends on the sector: a utility with regulated revenue can carry levels that would sink a cyclical. What is almost always a bad sign is the trend: the ratio rising because EBITDA is falling, rather than because debt grew to fund an investment.
Where to see it on ValuatePad
Year by year, for every company, in the tab Debt management.