Enter the EBITDA and total debt into the calculator to determine the Ebitda to Debt Ratio.
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EBITDA to Debt Ratio Formula
EBITDA-to-Debt = EBITDA / Total Debt
The inverse, which is more commonly cited by lenders and analysts:
Debt-to-EBITDA = Total Debt / EBITDA
If you do not have EBITDA directly, build it from the income statement:
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
- EBITDA: earnings before interest, taxes, depreciation, and amortization
- Total Debt: short-term plus long-term interest-bearing debt
- Net Income: bottom-line profit for the period
- Interest: interest expense for the period
- Taxes: income tax expense for the period
- Depreciation and Amortization: non-cash charges from the cash flow statement
Use trailing twelve-month EBITDA against the most recent debt balance, and keep currency and scale (millions, thousands) consistent across every input. Operating leases and pension shortfalls are sometimes added to debt in stricter analyses.
Reference Tables
The first table shows how lenders and credit analysts typically read the Debt-to-EBITDA multiple. The second shows the same result expressed as the EBITDA-to-Debt ratio.
| Debt / EBITDA | Read | Typical view |
|---|---|---|
| Below 2.0x | Low | Conservative balance sheet |
| 2.0x to 3.0x | Moderate | Manageable for most industries |
| 3.0x to 4.0x | Elevated | Watch covenants and rate sensitivity |
| 4.0x to 6.0x | High | Common in LBOs and capital-intensive sectors |
| Above 6.0x | Stressed | Refinancing and default risk rises sharply |
| EBITDA / Debt | Equivalent multiple | Interpretation |
|---|---|---|
| 50% or higher | ≤ 2.0x debt | Strong cash coverage |
| 33% to 50% | 2.0x to 3.0x | Average |
| 25% to 33% | 3.0x to 4.0x | Tight |
| Below 25% | Above 4.0x | Highly leveraged |
Example and FAQ
Example. A company reports net income of 8, interest of 1.2, taxes of 2, and D&A of 3.5 (all in millions). EBITDA is 8 + 1.2 + 2 + 3.5 = 14.7. With total debt of 50, Debt-to-EBITDA is 50 / 14.7 = 3.40x and EBITDA-to-Debt is 14.7 / 50 = 29.4%. That falls in the elevated range.
Should I use gross or net debt? Most credit agreements use gross debt. Net debt (gross debt minus cash) is common in equity research and produces a lower multiple.
Why is my ratio "not meaningful"? When EBITDA is zero or negative, the multiple does not describe leverage in the usual way. Look at interest coverage and cash flow instead.
What counts as total debt? Bank loans, bonds, notes, current portion of long-term debt, and finance lease liabilities. Trade payables are not debt.
Is a higher EBITDA-to-debt ratio better? Yes. A higher ratio means each dollar of debt is backed by more annual operating earnings.